<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______ .
Commission file number 0-14703
NBT BANCORP INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1268674
(State of Incorporation)(I.R.S. Employer Identification No.)
52 South Broad Street
Norwich, New York 13815
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: 607-337-6000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par, $1.00 Stated Value
Preferred Stock, No Par, $1.00 Stated Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this FORM 10-K or any amendment to this FORM 10-K.
_X_.
There are no delinquent filers to the Registrant's knowledge.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter periods that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes _X_ No ___
As of February 28, 1997, there were 9,002,467 shares outstanding,
including 444,636 shares held in the treasury, of the Registrant's
common stock, No Par, Stated Value $1.00; of which 8,062,387 common
shares having a market value of $147,138,563 were held by
nonaffiliates of the Registrant. There were no shares of the
Registrant's preferred stock, No Par, Stated Value $1.00,
outstanding at that date.
Documents Incorporated by Reference
Portions of the Proxy Statement of NBT BANCORP INC. dated March 17,
1997 for the Annual Meeting of Stockholders to be held on April 19,
1997 are incorporated by reference into Part III of this FORM 10-K
as detailed therein.
An index to exhibits follows the signature page of this Form 10-K.
II-1
<PAGE>
<TABLE>
CROSS REFERENCE INDEX
<CAPTION>
<S> <C> <C> <C>
Part I. Item 1 Business
Description of Business II-3, 4
Average Balance Sheets II-7
Net Interest Income Analysis - Taxable Equivalent Basis II-7
Net Interest Income and Volume/Rate Variance - Taxable Equivalent
Basis II-8
Securities Portfolio II-12
Securities - Maturity/Yield Schedule II-30
Loans II-12
Maturities and Sensitivities of Loans to Changes in Interest Rates II-13
Nonperforming and Risk Assets II-13
Allowance for Loan Losses II-9
Maturity Distribution of Time Deposits II-14
Return on Equity and Assets II-5
Short-Term Borrowings II-33
Item 2 Properties II-19
Item 3 Legal Proceedings
In the normal course of business there are various outstanding
legal proceedings. In the opinion of management, the aggregate
amount involved in such proceedings is not material to the
financial condition or results of operations of the company.
Item 4 Submission of Matters to a Vote of Security Holders
There has been no submission of matters to a vote of stockholders
during the quarter ended December 31, 1996.
Part II. Item 5 Market for the Registrant's Common Stock and Related II-15, 35, 36
Shareholder Matters
Item 6 Selected Financial Data II-5
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operation II-5 thru 18
Item 8 Financial Statements and Supplementary Data
Consolidated Balance Sheets at December 31, 1996 and 1995 II-23
Consolidated Statements of Income for each of the years in the
three-year period ended December 31, 1996 II-24
Consolidated Statements of Stockholders' Equity for each of the
years in the three-year period ended December 31, 1996 II-25
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1996 II-26
Notes to Consolidated Financial Statements II-27 thru 43
Independent Auditors' Report II-22
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with accountants
on accounting and financial disclosures.
Part III. Item 10 Directors and Executive Officers of the Registrant *
Item 11 Executive Compensation *
Item 12 Security Ownership of Certain Beneficial Owners and Management *
Item 13 Certain Relationships and Related Transactions *
Part IV. Item 14 Exhibits, Financial Statement Schedules, and Reports on 8-K
(a)(1) Financial Statements (See Item 8 for Reference).
(2) Financial Statement Schedules normally required on Form
10-K are omitted since they are not applicable.
(3) Exhibits have been filed separately with the Commission
and are available upon written request.
(b) No reports on Form 8-K were filed during the last quarter
of the period covered by this report.
(c) Refer to item 14(a)(3) above.
(d) Refer to item 14(a)(2) above.
<FN>
* Information called for by Part III (Items 10 through 13) is incorporated by reference to
the Registrant's Proxy Statement for the 1997 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission.
</FN>
</TABLE>
II-2
<PAGE>
DESCRIPTION OF BUSINESS
REGISTRANT
NBT Bancorp Inc. ("Registrant") is a registered bank holding company
headquartered in Norwich, New York. The Registrant is the parent
holding company of NBT Bank, N.A. ("Bank"), a nationally chartered
commercial bank. The principal asset of the Registrant is all of the
outstanding shares of common stock of the Bank and its principal
source of revenue is dividends it receives from the Bank.
The Bank is a full service bank providing a broad range of
financial products including commercial and retail banking and trust
services. The Bank has thirty-five locations serving an eight county
area in central and northern New York.
As of December 31, 1996, the Bank had 443 full-time and 87 part-
time employees. The Bank is not a party to any collective bargaining
agreements, and employee relations are considered to be good.
COMPETITION
The banking business is extremely competitive and the Bank
encounters intense competition from other financial institutions
located within its market area. The Bank competes not only with
other commercial banks but also with other financial institutions
such as thrifts, credit unions, money market and mutual funds,
insurance companies, brokerage firms, and a variety of other
companies offering financial services.
SUPERVISION AND REGULATION
The Registrant, as a bank holding company, is regulated under the
Bank Holding Company Act of 1956, as amended (Act), and is subject
to the supervision of the Board of Governors of the Federal Reserve
System (FRB). Generally, the Act limits the business of bank holding
companies to banking, or managing or controlling banks, performing
certain servicing for subsidiaries, and engaging in such other
activities as the FRB may determine to be so closely related to
banking as to be a proper incident thereto. The Registrant is a
legal entity separate and distinct from the Bank. The principal
source of the Registrant's income is the Bank's earnings, and the
principal source of its cash flow is dividends from the Bank.
Federal laws impose limitations on the ability of the Bank to pay
dividends as discussed in the Notes to Consolidated Financial
Statements. FRB policy requires bank holding companies to serve as a
source of financial strength to their subsidiary banks by standing
ready to use available resources to provide adequate capital funds
to subsidiary banks during periods of financial stress or adversity.
The Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA) substantially revised the depository institution
regulatory and funding provisions of the Federal Deposit Insurance
Act and made revisions to several other federal banking statutes.
Among other things, federal banking regulators are required to take
prompt corrective action in respect of depository institutions that
do not meet minimum capital requirements. FDICIA identifies the
following capital catagories for financial institutions: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized.
Rules adopted by the federal banking agencies under FDICIA
provide that an institution is deemed to be well capitalized if the
institution has a total risk-based capital ratio of 10.0% or
greater, a Tier I risk-based ratio of 6.0% or greater, and a
leverage ratio of 5.0% or greater and the institution is not subject
to an order, written agreement, capital directive, or prompt
corrective action directive to meet and maintain a specific level
for any capital measure. FDICIA imposes progressively more
restrictive constraints on operations, management and capital
distributions, depending on the capital category in which an
institution is classified. At December 31, 1996, the Registrant and
the Bank fell into the well capitalized category based on the ratios
and guidelines noted above.
The appropriate Federal banking agency may, under certain
circumstances, reclassify a well capitalized insured depository
institution as adequately capitalized. The appropriate agency is
also permitted to require an adequately capitalized or
undercapitalized institution to comply with the supervisory
provisions as if the institution were in the next lower category,
but not treat a significantly undercapitalized institution as
critically undercapitalized, based on supervisory information other
than the capital levels of the institution. The statute provides
that an institution may be reclassified if the appropriate Federal
banking agency determines, after notice and opportunity for hearing,
that the institution is in an unsafe or unsound condition or deems
the institution to be engaging in an unsafe or unsound practice.
The Act requires prior approval of the FRB of the acquisition by
the Registrant of more than 5 percent of the voting shares of any
bank or any other bank holding company. Subject to certain limits,
the Act allows adequately capitalized and adequately managed bank
holding companies to acquire control of banks in any state. An
interstate acquisition may not be approved, however, if immediately
II-3
<PAGE>
before the acquisition the acquirer controls an FDIC-insured
institution or branch in the state of the institution to be
acquired, and if immediately following the acquisition the acquirer
would control 30 percent or more of the total FDIC-insured deposits
in that state; but a state may waive the 30-percent limitation by
statute, regulation, or order, or by certain nondiscriminatory
administrative approvals.
The Bank is subject to primary supervision, regulation, and
examination by the Office of the Comptroller of the Currency (OCC),
whose regulations are intended primarily for the protection of the
Bank's depositors and customers rather than holders of the
Registrant's securities. The Bank is subject to extensive federal
statutes and regulations that significantly affect its business and
activities. The Bank must file reports with its regulators
concerning its activities and financial condition and obtain
regulatory approval to enter into certain transactions. The Bank is
also subject to periodic examinations by the OCC to ascertain
compliance with various regulatory requirements. Other applicable
statutes and regulations relate to insurance of deposits, allowable
investments, loans, acceptance of deposits, trust activities,
mergers, consolidations, payment of dividends, capital requirements,
reserves against deposits, establishment of branches and certain
other facilities, limitations on loans to one borrower and loans to
affiliated persons, and other aspects of the business of banks.
Recent federal legislation has instructed federal agencies to adopt
standards or guidelines governing banks' internal controls,
information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth,
compensation and benefits, asset quality, earnings and stock
valuation, and other matters. Legislation adopted in 1994 gives the
federal banking agencies greater flexibility in implementing
standards on asset quality, earnings, and stock valuation.
Regulatory authorities have broad authority to initiate proceedings
designed to prohibit banks from engaging in unsafe and unsound
banking practices.
FDIC INSURANCE ASSESSMENTS
The deposits of the Bank are insured, up to an applicable limit, by
the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC"). During 1995, BIF reached its statutory target
of 1.25% of total insured deposits and the BIF assessment rates were
reduced from .23% to .04% for the highest rated banks. For 1996, the
highest rated banks were not assessed on the level of their deposits
but rather paid a minimum fee of $2,000 to BIF. Until June 30, 1997,
BIF-assessable deposits will be subject to an assessment schedule
providing for an assessment range of 0% to .27% (with intermediate
rates of .03%, .10%, .17% and .24%, depending upon an institution's
supervisory risk group). Beginning on July 1, 1997, BIF-assessable
deposits will be subject to an assessment schedule providing for an
assessment range of .4% to .31% (with intermediate rates of .07%,
.14%, .21% and .28%, depending upon an institution's supervisory risk
group). BIF assessment rates are subject to semi-annual adjustment by
the FDIC Board of Directors within a range of up to five basis points
without public comment. The FDIC Board of Directors also possesses
authority to impose special assessments from time to time.
In 1996, Congress enacted the Deposit Insurance Funds Act which
establishes a schedule to merge with BIF and Savings Association
Insurance Fund ("SAIF") on January 1, 1999, provided a law is passed
by that date merging the bank and thrift charters. The act also
provides for funding Financing Corp ("FICO") bonds. BIF-assessable
deposits are subject to assessment for payment on the FICO bond
obligation at one-fifth the rate of SAIF-assessable deposits.
Accordingly, BIF insured banks will pay a rate of .013% for purposes
of funding FICO bond obligations. The estimated impact for 1997 is
expected to be $116,000 for the Bank. The .013% rate will be in
effect for the year 1999, after which banks and thrifts will pay
equal amounts currently estimated to be .04% of assessable deposits.
II-4
<PAGE>
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(in thousands,except per share data) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31
Interest and fee income $ 84,387 $ 77,400 $ 70,438 $ 66,957 $ 69,208
Interest expense 36,365 34,840 25,742 23,200 27,194
Net interest income 48,022 42,560 44,696 43,757 42,014
Provision for loan losses 3,175 1,553 3,071 2,281 2,362
Noninterest income excluding
securities gains 7,683 6,957 6,484 8,108 8,895
Securities gains 1,179 145 555 1,573 1,108
Noninterest expense 34,422 33,024 38,674 37,298 36,093
Income before income taxes 19,287 15,085 9,990 13,859 13,562
Net income 12,179 9,329 6,508 8,505 8,043
- -----------------------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net income $ 1.43 $ 1.06 $ 0.73 $ 0.95 $ 0.92
Cash dividends declared $ 0.522 $ 0.450 $ 0.407 $ 0.375 $ 0.341
Stock dividends distributed 5% 5% 5% 5% 5%
Book value at year end $ 12.72 $ 12.44 $ 11.12 $ 11.41 $ 10.72
Tangible book value $ 11.52 $ 11.11 $ 10.01 $ 9.93 $ 8.74
Average common shares
outstanding 8,513 8,800 8,939 8,897 8,732
- -----------------------------------------------------------------------------------------------------------
AT DECEMBER 31
Assets available for sale $ 373,337 $ 399,625 $ 119,398 $219,690 $ 39,590
Securities held to maturity 42,239 40,311 272,466 108,077 215,515
Loans 654,593 588,385 574,718 559,860 539,283
Allowance for loan losses 10,473 9,120 9,026 8,652 9,245
Total assets 1,138,986 1,106,266 1,044,557 953,907 868,616
Deposits 916,319 873,032 791,443 807,228 740,749
Short-term borrowings 88,244 115,945 140,587 26,701 16,418
Other borrowings 20,195 3,012 8,734 14,457 10,320
Total stockholders' equity 106,264 108,044 98,307 101,108 94,012
- -----------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 1.10% 0.90% 0.64% 0.93% 0.94%
Return on average equity 1.80% 9.18% 6.53% 8.79% 8.89%
Average equity to average assets 9.29% 9.75% 9.88% 10.63% 10.62%
Net interest margin 4.69% 4.43% 4.81% 5.26% 5.52%
Efficiency ratio 60.74% 65.92% 70.22% 71.05% 69.48%
Cash dividend per share payout 36.50% 42.61% 56.13% 39.19% 36.61%
Tier 1 leverage ratio
(Regulatory guideline 4%) 8.70% 8.80% 9.05% 9.24% 9.01%
Tier 1 risk-based capital ratio
(Regulatory guideline 4%) 14.06% 15.21% 16.09% 15.40% 15.30%
Total risk-based capital ratio
(Regulatory guideline 8%) 15.31% 16.46% 17.35% 16.66% 16.61%
- -----------------------------------------------------------------------------------------------------------
*All per share data has been restated to give retroactive effect to stock dividends and
splits.
</TABLE>
II-5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to provide the reader
with a concise description of the financial condition and results of
operations of NBT Bancorp Inc. (Bancorp) and its wholly owned
subsidiary, NBT Bank, N.A. (Bank) collectively referred to herein as
the Company. This discussion will focus on Results of Operations,
Financial Position, Capital Resources, and Asset/Liability
Management.
OVERVIEW
The Company achieved record operating performance during 1996. Net
income increased to $12.2 million, a 30% gain over earnings of $9.3
million in 1995. Leading the improved earnings was an increase of
$5.5 million in net interest income arising from expanded loan
volume and improved yields on securities. Other (noninterest) income
was $1.8 million greater than 1995 offset by an increase of $1.4
million in other (noninterest) operating expenses.
The securities portfolio consists of 90% U.S. Treasury and U.S.
Agency guaranteed instruments, all classified as available for sale.
Net gains in 1996 of $1.2 million were realized from sales of
securities classified as available for sale. A shift of
approximately $95 million from U.S. Treasury to U.S. Government
agencies securities provided an increase in overall portfolio tax
equivalent yield of .41% (41 basis points) from December 31, 1995 to
December 31, 1996.
Contributing to the positive operating results was 1996 loan
growth of $66 million (11.3%). Loan growth was balanced between
commercial and consumer portfolios with increases of $34.7 million
and $32.6 million, respectively. Mortgage loan volume continued a
marginal decline mirroring the weakness in residential real estate
demand in the Bank's primary markets.
Deposits of $916.3 million at December 31, 1996, were $43.3
million higher (5%) than the year previous. Deposits averaged $916.7
million for the year, an 8.1% increase over 1995 average deposits.
Time deposits (certificates) accounted for the increase in deposit
volume.
In November 1995 the Board of Directors approved a 500,000 share
buyback program which extended from the date of authorization to
November 1996. During this twelve month period, the Company acquired
454,000 shares or approximately 5.4% of the common stock
outstanding. Shares acquired will be used primarily for employee
benefits and stock option programs.
In December 1996, the Company distributed a 5% stock dividend,
making this the thirty-seventh consecutive year of stock dividends
and/or stock splits. Throughout this report, amounts per common
share and common shares outstanding have been retroactively adjusted
to reflect the stock dividends.
NET INTEREST INCOME
Net interest income is the difference between interest and fees
earned on assets and the interest paid on deposits and borrowings.
Net interest income is one of the major determining factors in a
financial institutions performance as it is the principal source of
earnings. Table 1 presents average balance sheets and a net interest
income analysis on a taxable equivalent basis for each of the years
in the three-year period ended December 31, 1996.
As reflected in Table 1, net interest income, on a taxable
equivalent basis, increased $5.6 million, or 13.0% from $43.4
million in 1995 to $49.0 million in 1996. The increase was due to a
5.9% increase in the net interest margin from 4.4% in 1995 to 4.7%
in 1996. Yields on earning assets increased 18 basis points or 2.3%
whereas the cost of deposits and borrowings was reduced by 19 basis
points or 4.4%.
In comparing 1995 to 1994, the decline in taxable equivalent net
interest income and net interest margin is attributed to increased
rates paid on interest bearing liabilities. Whereas the increase in
yields on earning assets was 46 basis points, or 6.1%, the average
rates paid on liabilities increased 103 basis points or 31.5%. Net
interest margin declined from 4.8% in 1994 to 4.4% in 1995. The
decrease of $2 million in net interest income relates directly to
the decline in the net interest margin rate.
Average earning assets increased by $65.7 million or 6.7%, in
1996 over 1995. Average loans increased $41.8 million or 7.3% during
the year and investment securities increased $26.5 million or 6.7%
during 1996.
During 1996, average interest bearing deposits and liabilities
increased by $74.2 million, or 9.2%. Growth came primarily in time
deposits (certificates) with an average increase of $53.6 million,
or 14.3%. As reflected on Table 2, the net increase in interest
expense of $1.5 million from 1995 to 1996 was comprised of an
increase of $3.1 million arising from higher average balances and a
decrease of $1.6 million due to lower interest rates.
Average interest bearing deposits and liabilities increased by
$23.6 million or 3.0% from 1994 to 1995, as a result of increases in
interest bearing deposits. The average cost of liabilities increased
from 3.3% in 1994 to 4.3% in 1995, a 31.5% rate increase. The
increase arose primarily as a result of volume declines and the
lower costing savings, NOW, and money market account with
corresponding increases in the higher paying time deposits. The
total increase in interest expense of $9.1 million from 1994 to 1995
consists of $2.1 million volume variance and $7.0 million rate
variance.
II-6
<PAGE>
<TABLE>
TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME
The following table includes the condensed consolidated average balance sheet, an analysis
of interest income/expense and average yield/rate for each major category of earning assets
and interest-bearing deposits and liabilities on a taxable equivalent basis. Interest income
is adjusted for items exempt from Federal income taxes and assumes a 35% tax rate.
<CAPTION>
1996 1995 1994
---------------------------- ----------------------------- ----------------------------
(dollars in thousands) Average Yield/ Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits $ 304 $ 16 5.26% $ 472 $ 21 4.45% $ 171 $ 8 4.68%
Federal funds sold 323 18 5.57 589 34 5.77 414 13 3.14
Short-term investments
available for sale 1,088 57 5.24 1,564 91 5.82 2,441 89 3.65
Securities available for
sale, taxable 374,574 24,355 6.50 147,073 9,137 6.21 134,488 7,809 5.81
Loans available for sale 4,427 372 8.40 6,099 545 8.94 9,457 671 7.10
Securities held to maturity:
Taxable 11,914 788 6.61 217,201 13,154 6.06 200,501 11,878 5.92
Tax exempt 33,661 2,316 6.88 29,392 2,102 7.15 30,101 1,781 5.92
------ ----- ------- ------ ------- ------
Total securities held
to maturity 45,575 3,104 6.81 246,593 15,256 6.19 230,602 13,659 5.92
Loans:
Commercial 263,193 25,579 9.72 229,481 22,862 9.96 212,007 18,528 8.74
Real estate mortgage 119,993 10,184 8.49 126,280 10,358 8.20 131,615 9,555 7.26
Consumer 233,948 21,668 9.26 219,587 19,886 9.06 221,794 20,778 9.37
------- ------ ------- ------ ------- ------
Total Loans 617,134 57,431 9.31 575,348 53,106 9.23 565,416 48,861 8.64
--------- ------ ------- ------ ------- ------
Total earning assets 1,043,425 85,353 8.18 977,738 78,190 8.00 942,989 71,110 7.54
------ ------ ------
Cash and due from banks 36,171 35,022 35,076
Securities available for sale
valuation allowance (2,752) (2,736) (3,018)
Allowance for loan losses (9,657) (9,330) (8,863)
Premises and equipment 16,465 15,671 15,807
Other assets 27,316 25,833 27,581
------ ------ ------
Total assets $1,110,968 $1,042,198 $1,009,572
---------- ---------- ----------
<PAGE>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Money market deposit accounts $ 101,753 2,977 2.93 $ 108,928 3,173 2.91 $ 148,341 3,818 2.57
NOW accounts 108,806 1,873 1.72 83,807 1,582 1.89 87,041 1,407 1.62
Savings deposits 159,373 4,650 2.92 154,091 4,554 2.96 177,015 4,707 2.66
Certificates of deposit 430,464 22,442 5.21 376,852 20,374 5.41 286,818 11,551 4.03
------- ------ ------- ------ ------- ------
Total interest bearing
deposits 800,396 31,942 3.99 723,678 29,683 4.10 699,215 21,483 3.07
Short-term borrowings 73,192 3,745 5.12 80,596 4,700 5.83 73,083 3,351 4.59
Other borrowings 10,288 678 6.59 5,424 457 8.43 13,846 908 6.56
------- ------ ------- ------ ------- ------
Total interest bearing
liabilities 883,876 36,365 4.11% 809,698 34,840 4.30% 786,144 25,742 3.27%
------ ------ ------
Demand deposits 116,287 124,611 118,186
Other liabilities 7,565 6,259 5,532
Stockholders' equity 103,240 101,630 99,710
------- ------- -------
Total liabilities and
stockholders' equity $1,110,968 $1,042,198 $1,009,572
---------- ---------- ----------
Net interest income $48,988 $43,350 $45,368
------- ------- -------
Net interest margin 4.69% 4.43% 4.81%
----- ----- -----
Taxable equivalent adjustment $ 966 $ 790 $ 672
<FN> ------- ------- -------
(1) For purposes of these computations, nonaccrual loans are included in the average loan
balances outstanding.
(2) Securities are shown at average amortized cost.
</FN>
</TABLE>
II-7
<TABLE>
<PAGE>
TABLE 2
ANALYSIS OF CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) Increase (Decrease)
1996 OVER 1995 1995 over 1994
- ------------------------------------------------------------------------------------------------------------
(in thousands) VOLUME RATE TOTAL Volume Rate Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits $ (8) $ 3 $ (5) $ 13 $ - $ 13
Federal funds sold (15) (1) (16) 7 14 21
Short-term securities
available for sale (26) (8) (34) (39) 41 2
Securities available for sale 14,773 445 15,218 760 568 1,328
Loans available for sale (142) (31) (173) (274) 148 (126)
Securities held to maturity:
Taxable (13,476) 1,110 (12,366) 1,007 269 1,276
Tax exempt 296 (82) 214 (43) 364 321
Loans 3,887 438 4,325 871 3,374 4,245
- ------------------------------------------------------------------------------------------------------------
Total interest income 5,289 1,874 7,163 2,302 4,778 7,080
- ------------------------------------------------------------------------------------------------------------
Money market deposit accounts (210) 14 (196) (1,104) 459 (645)
NOW accounts 440 (149) 291 (54) 229 175
Savings accounts 155 (59) 96 (646) 493 (153)
Certificates of deposit 2,816 (748) 2,068 4,220 4,603 8,823
Short-term borrowings (409) (546) (955) 370 979 1,349
Other borrowings 338 (117) 221 (659) 208 (451)
- ------------------------------------------------------------------------------------------------------------
Total interest expense 3,130 (1,605) 1,525 2,127 6,971 9,098
- ------------------------------------------------------------------------------------------------------------
CHANGE IN FTE NET
INTEREST INCOME $ 2,159 $ 3,479 $ 5,638 $ 175 $(2,193) $(2,018)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
PROVISION AND ALLOWANCE FOR LAON LOSSES
The provision for loan losses is based upon management's judgement
as to the adequacy of the allowance to absorb the future losses. In
assessing the adequacy of the allowance for loan losses,
consideration is given to historical loan loss experience, value and
adequacy of collateral, level of nonperforming loans, loan
concentrations, the growth and composition of the portfolio, and the
results of a comprehensive in-house loan review program conducted
throughout the year. Consideration is given to the results of
examinations and evaluations of the overall portfolio by senior
credit personnel, internal and external auditors, and regulatory
examiners.
Accompanying tables reflect the five years history of net
charge-offs and the allocation of the allowance by loan category.
Net charge-offs, both as dollar amounts and as percentages of
average loans outstanding, have decreased indicating stable asset
quality. Nonetheless, management considered it prudent to increase
the dollar level and percentage relationship of the allowance to
various asset categories as depicted in the tables. The allowance
has been allocated based on identified problem credits or
categorical trends. The unallocated portion is available for further
unforseen or unexpected losses or unidentified problem credits.
Management considers the allowance to be adequate for the reporting
periods and will continue to target and maintain a minimum allowance
equal to the allocated requirement plus an unallocated portion.
II-8
<PAGE>
<TABLE>
TABLE 3
ALLOWANCE FOR LOAN LOSSES
<CAPTION>
- -------------------------------------------------------------------------------------------------
(dollars in thousands) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1 $ 9,120 $9,026 $8,652 $9,245 $9,845
Loans charged off:
Real estate mortgages 204 112 154 43 34
Commercial and agricultural 1,274 967 1,409 1,222 1,742
Consumer 1,300 1,182 2,159 2,395 2,107
- -------------------------------------------------------------------------------------------------
Total loans charged off 2,778 2,261 3,722 3,660 3,883
Recoveries:
Real estate mortgages 20 - - 2 5
Commercial and agricultural 274 193 291 267 355
Consumer 662 609 734 517 561
- -------------------------------------------------------------------------------------------------
Total recoveries 956 802 1,025 786 921
- -------------------------------------------------------------------------------------------------
Net loans charged off 1,822 1,459 2,697 2,874 2,962
Provision for loan losses 3,175 1,553 3,071 2,281 2,362
- -------------------------------------------------------------------------------------------------
Balance at December 31 $10,473 $9,120 $9,026 $8,652 $9,245
- -------------------------------------------------------------------------------------------------
Allowance for loan losses to
loans outstanding at end of year 1.60% 1.55% 1.57% 1.55% 1.71%
Allowance for loan losses to
nonperforming loans 315% 189% 195% 207% 243%
Nonperforming loans to total loans 0.51% 0.82% 0.81% 0.74% 0.71%
Nonperforming assets to total assets 0.40% 0.62% 0.52% 0.48% 0.53%
Net charge-offs to average loans
outstanding 0.29% 0.25% 0.48% 0.52% 0.55%
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
TABLE 4
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
CATEGORY Category Category Category Category
PERCENT Percent Percent Percent Percent
(dollars in thousands) ALLOWANCE OF LOANS Allowance of Loans Allowance of Loans Allowance of Loans Allowance of Loans
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate
mortgages $ 360 18.3% $ 412 20.6% $ 630 22.5% $ 206 24.3% $ 394 29.2%
Commercial
and agricultural 4,341 43.1% 4,250 42.0% 3,726 37.5% 3,699 36.9% 2,788 30.9%
Consumer 2,335 38.6% 2,048 37.4% 3,538 40.0% 3,767 38.8% 3,887 39.9%
Unallocated 3,437 - 2,410 - 1,132 - 980 - 2,176 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total $10,473 100.0% $9,120 100.0% $9,026 100.0% $8,652 100.0% $9,245 100.0%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NONINTEREST INCOME
Noninterest income consists primarily of trust and custodian fees,
service charges on deposit accounts, gains (or losses) on the sales
of securities, and fees and service charges for other banking
services. Total noninterest income for 1996 of $8.9 million
increased $1.8 million or 24.8% over 1995. Excluding securities
gains of $1.2 million, other income increased $.7 million, or 10.4%,
in 1996 over 1995. Overall changes from 1994 to 1995 were not
significant.
<TABLE>
TABLE 5
NONINTEREST INCOME SUMMARY
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1996/1995 1995/1994
(dollars in thousands) 1996 1995 1994 Amount Change Amount Change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust income $2,642 $2,439 $2,511 203 8.32% (72) (2.87%)
Deposit service charges 3,372 2,995 3,032 377 12.59% (37) (1.22%)
Securities gains 1,179 145 555 1,034 713.10% (410) (73.87%)
Other income 1,669 1,523 941 146 9.59% 582 61.85%
- ------------------------------------------------------------------------------------------------------------
Total noninterest income $8,862 $7,102 $7,039 1,760 24.78% 63 .90%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
II-9
<PAGE>
The Trust Department of the Company has $631 million in assets
(market value) under management at December 31, 1996. During 1996,
trust assets grew $67 million or 12% with resultant growth in income
of $.2 million. Trust fees declined from 1994 to 1995, primarily
from reductions in charges to estates and personal agency accounts.
Service charges on deposit accounts increased 12.6% over last
year. There were no significant changes in the fee structure or in
the volume of transaction accounts; however, emphasis was placed on
collection vs. waiver, particularly for overdraft charges which
accounted for a major part of the increase. Changes were nominal
from 1994 to 1995.
Net gains in 1996 of $1.2 million were realized from sales of
U.S. Treasury and U.S. Government agencies securities which were all
classified as available for sale. A shift of approximately $95
million from U.S. Treasury to Government agencies' securities, as
well as other selected sales and purchases, provided an increase in
overall portfolio tax equivalent yield of .41% (41 basis points)
from December 31, 1995 to December 31, 1996. This was accomplished
with minimal credit or interest rate risk and with no significant
extension of average maturity. Net gains declined from 1994 to 1995
as market conditions fluctuated. Also, a major part of the U.S.
Treasury and U.S. Agency securities were classified as held to
maturity until December 1995 when all were reclassified to available
for sale.
NONINTEREST EXPENSE AND OPERATING EFFICIENCY
Table 6 presents noninterest expense and operating efficiency ratios
for each of the three years ending December 31, 1996. Noninterest
expense as a percentage of average assets in 1996 declined slightly
from 1995, being 3.1% and 3.2%, respectively. The 1995 percentage
declined from 3.8% in 1994, primarily as a result of decreased FDIC
insurance and a restructuring charge of $2.3 million taken in 1994.
Salaries and employee benefits increased $1.5 million or 9.3%,
in 1996 over 1995. Expense increases were primarily due to a $.6
million increase in performance based incentives and $.5 million
increase in retirement benefits. This category reflects little
difference from 1995 or 1994.
Expense control efforts have held occupancy and equipment
expenses relatively flat over the past three years. These expenses
reflect a small improvement compared to total average assets.
FDIC insurance declined from $.9 million in 1995 to $2 thousand
in 1996. The decline occurred as the FDIC Bank Insurance Fund (BIF)
attained congressionally mandated reserve goals during the second
quarter of 1995. The 1995 FDIC insurance expense was reduced from
$1.8 million in 1994 as insurance premiums were reduced from $0.23
to $0.04 per $100 of insured deposits in June 1995. The Bank has the
highest rating for purposes of FDIC insurance assessment and,
accordingly has historically paid the lowest deposit insurance
premium.
Operating expenses increased $.7 million from 1995 to 1996 as a
result of $.3 million increase in amortization of intangible assets
arising from the December 1995 acquisition of three branches, and an
increase of $.4 million in data processing and loan origination
charges, corresponding to increased volumes. Other operating
expenses for 1995 declined $4.6 million from 1994 as a result of
reduction and amortization of intangible assets of $2 million and
$2.3 million and restructuring expense taken in 1994.
II-10
<PAGE>
<TABLE>
TABLE 6
NONINTEREST EXPENSE AND OPERATING EFFICIENCY ANALYSIS
<CAPTION>
Years Ended December 31,
1996 1995 1994 1996/1995 1995/1994
- -----------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent
of of of
Average Average Average Average Average
(dollars in thousands) Amount Assets Amount Assets Amount Assets Amount Change Amount Change
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses:
Personnel $17,817 1.60% $16,309 1.56% $16,157 1.60% $1,508 9.25% $ 152 0.94%
Occupancy and equipment 4,156 0.37% 4,055 0.39% 4,328 0.43% 101 2.49% (273) (6.31%)
FDIC insurance 2 -% 941 0.09% 1,829 0.18% (939) (99.79%) (888) (48.55%)
Other 12,447 1.12% 11,719 1.12% 16,360 1.62% 728 6.21% (4,641) (28.37%)
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $34,422 3.10% $33,024 3.17% $38,674 3.83% $1,398 4.23% $(5,650) (14.61%)
- -----------------------------------------------------------------------------------------------------------------------------
Expense ratio (1) 2.41% 2.51% 2.96%
Efficiency ratio (2) 60.74% 65.92% 70.22%
Average assets per
employee (in millions) $ 2.1 $ 1.9 $ 1.8
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Noninterest expense less noninterest income, not including security gains and other non-
recurring income or expense, as a percentage of average assets.
(2) Noninterest expense, less non-recurring expenses, as a percentage of tax-effected net
interest income plus noninterest income, less security gains.
</FN>
</TABLE>
INCOME TAXES
Income tax expense was $7.1 million for 1996, $5.8 million for 1995,
and $3.5 million for 1994. The increases generally correspond to
increased income before income taxes. Effective income tax rates
were 36.9% for 1996, 38.2% for 1995, and 34.8% for 1994. At December
31, 1996, the Company has deferred tax assets of $6.4 million and
deferred tax liabilities of $1.4 million. Management has determined
that a valuation allowance for the deferred tax assets is not needed
at December 31, 1996. Additional information on income taxes is
provided in the notes to financial statements.
SECURITIES
The securities portfolio constituted 40.3% of average earning assets
during 1996 and 1995. Investments are primarily U.S. Treasury and
U.S. Governmental agency guaranteed securities classified as
available for sale. Held to maturity securities are obligations of
the State of New York political subdivisions and do not include any
direct obligations of the state of New York.
In 1995, the Company reclassified a substantial portion of the
securities portfolio from held to maturity to available for sale.
All subsequent purchases of U.S. Treasury and U.S. Governmental
agency guaranteed securities have been classified as available for
sale. All sales of securities have been made from the available for
sale category.
II-11
<PAGE>
<TABLE>
TABLE 7
SECURITIES PORTFOLIO
<CAPTION>
As of December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities Available For Sale
U.S. Treasury $ 70,811 $ 70,269 $169,801 $171,908 $ 33,085 $ 32,914
Federal Agency and
mortgage-backed 299,202 297,133 217,655 220,305 80,695 73,576
State & Municipal and other
securities 1,775 1,800 1,308 1,323 1,921 1,987
- ---------------------------------------------------------------------------------------------------------
Total securities
available for sale $371,788 $369,202 $388,764 $393,536 $115,701 $108,477
- ---------------------------------------------------------------------------------------------------------
Securities Held to Maturity
U.S. Treasury $ - $ - $ - $ - $170,757 $162,919
Federal Agency and
mortgage-backed - - - - 53,616 50,953
State & Municipal 32,546 32,546 28,521 28,517 37,292 37,241
Other securities 9,693 9,692 11,790 11,789 10,801 10,800
- ---------------------------------------------------------------------------------------------------------
Total securities held to
maturity $ 42,239 $ 42,238 $ 40,311 $ 40,306 $272,466 $261,913
- ---------------------------------------------------------------------------------------------------------
</TABLE>
LOANS
The following Table 8 sets forth the loan portfolio by major categories as of
December 31 for the years indicated:
<TABLE>
TABLE 8
COMPOSITION OF LOAN PORTFOLIO
<CAPTION>
- -----------------------------------------------------------------------------------------
December 31, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Real estate mortgages $110,288 $107,611 $125,385 $132,941 $156,457
Commercial real estate
mortgages 135,061 108,902 71,631 88,487 82,509
Real estate construction
and development 9,582 13,361 3,890 3,162 7,067
Commercial and
agricultural 146,930 138,391 143,632 118,143 87,103
Consumer 204,641 185,276 201,359 187,179 175,214
Home equity 48,091 34,817 28,704 29,741 30,636
Lease financing - 27 117 207 297
- -----------------------------------------------------------------------------------------
Total loans $654,593 $588,385 $574,718 $559,860 $539,283
- -----------------------------------------------------------------------------------------
</TABLE>
The loan portfolio is the largest component of earning assets and
accounts for the greatest portion of total interest income. At
December 31, 1996, total loans were $654.6 million, an 11.3%
increase from December 31, 1995. In general, loans are internally
generated and lending activity is confined to New York State,
principally the eight-county area served by the Bank. The Bank does
not engage in highly leveraged transactions or foreign lending
activities. There were no concentration of loans exceeding 10% of
total loans other than those categories reflected in Table 8.
Real estate mortgages consist primarily of loans secured by
first or second deeds of trust on primary residencies. Beginning in
1996 the Bank began retaining most first mortgage loans within the
portfolio. For several years prior to 1996, fixed-rate mortgages
were originated for sale in the secondary market. During 1996, the
Bank sold $.4 million in mortgage loans compared to sales of $10
million in 1995. There were no gains or losses recognized related to
sales of mortgages originated in 1996. At December 31, 1996, loans
classified as available for sale consist of higher education loans
with estimated fair market values equal to cost.
Loans in the commercial and agricultural category, as well as
commercial real estate mortgages, consist primarily of short-term
and/or floating rate commercial loans made to small to medium-sized
companies. Agricultural loans total $45.2 million at December 31,
1996, and there are no other substantial loan concentrations to any
one industry or to any one borrower.
II-12
<PAGE>
Consumer loans consist primarily of installment credit to
individuals secured by automobiles and other personal property.
Management believes underwriting guidelines to be conservative and
based primarily on satisfactory credit history, down payment, and
sufficient income to service monthly payments.
Shown in Table 9, Maturities and Sensitivities of Loans to
Changes in Interest Rates, are the maturities of the loan portfolio
and the sensitivity of loans to interest rate fluctuations at
December 31, 1996. Maturities are based on the earlier of
contractual maturities or rate repricing.
<TABLE>
TABLE 9
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AFTER ONE
YEAR BUT
WITHIN AFTER
REMAINING MATURITY AT WITHIN FIVE Five
December 31, 1996 ONE YEAR YEARS YEARS TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(in thousands)
Floating/adjustable rate:
Commercial and agricultural $226,904 $ 588 $ - $227,492
Real estate mortgages 87,097 3,781 - 90,878
Consumer 40,390 - - 40,390
- -----------------------------------------------------------------------------------------------------
Total floating rate loans 354,391 4,369 - 358,760
Fixed Rate:
Commercial and agricultural 10,395 27,480 16,624 54,499
Real estate mortgages 1,718 6,500 20,774 28,992
Consumer 63,981 128,820 19,541 212,342
- -----------------------------------------------------------------------------------------------------
Total fixed rate loans 76,094 162,800 56,939 295,833
- -----------------------------------------------------------------------------------------------------
Total loans $430,485 $167,169 $56,939 $654,593
- -----------------------------------------------------------------------------------------------------
</TABLE>
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets and past due loans are reflected in Table 10 below for
the years indicated.
<PAGE>
<TABLE>
TABLE 10
NONPERFORMING ASSETS AND RISK ELEMENTS
<CAPTION>
- ------------------------------------------------------------------------------------------------------
December 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Impaired commercial and
agricultural loans $2,441 $3,945 $ - $ - $ -
Other nonaccrual loans:
Real estate mortgages 251 332 783 365 76
Commercial
and agricultural - - 3,552 3,693 3,276
Consumer 628 540 304 112 450
- ------------------------------------------------------------------------------------------------------
Total nonaccrual loans 3,320 4,817 4,639 4,170 3,802
- ------------------------------------------------------------------------------------------------------
Other real estate owned 1,242 2,000 840 430 804
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets 4,562 6,817 5,479 4,600 4,606
- ------------------------------------------------------------------------------------------------------
Loans 90 days or more past due and still accruing:
Real estate mortgages 344 448 287 956 1,398
Commercial
and agricultural 418 559 133 410 1,133
Consumer 289 325 451 1,819 424
- ------------------------------------------------------------------------------------------------------
Total 1,051 1,332 871 3,185 2,955
- ------------------------------------------------------------------------------------------------------
Restructured loans, in compliance
with modified terms: - 142 - - -
- ------------------------------------------------------------------------------------------------------
Total assets containing
risk elements $5,613 $8,291 $6,350 $7,785 $7,561
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets to loans 0.70% 1.16% 0.95% 0.82% 0.85%
Total assets containing risk elements
to loans 0.86% 1.41% 1.10% 1.39% 1.40%
Total nonperforming assets to assets 0.40% 0.62% 0.52% 0.48% 0.53%
Total assets containing risk elements
to assets 0.49% 0.75% 0.61% 0.82% 0.87%
- ------------------------------------------------------------------------------------------------------
</TABLE>
II-13
<PAGE>
Total nonperforming assets decreased $2.3 million, or 33.1%, from
1995 to 1996; total assets containing risk elements declined $2.7
million or 32.3% in 1996. The changes in nonaccrual and impaired
loans is presented in Table 11 below. The effect of nonaccrual and
impaired loans on interest income is presented in Table 11
following:
<TABLE>
TABLE 11
NONACCRUAL AND IMPAIRED LOANS INTEREST INCOME
<CAPTION>
- -------------------------------------------------------------------------------------------------
December 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Income that would have been accrued
at original contract rates $1,125 $765 $465 $284 $276
Amount recognized as income 593 344 216 105 96
- -------------------------------------------------------------------------------------------------
Interest income not accrued $ 532 $421 $249 $179 $180
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
TABLE 12
CHANGES IN NONACCRUAL AND IMPAIRED LOANS
<CAPTION>
- -----------------------------------------------------------------------------------
(in thousands) 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $ 4,817 $ 4,639
Loans placed on nonaccrual 6,126 4,313
Charge-offs (1,710) (1,175)
Payments (3,593) (1,864)
Transfers to OREO (680) (1,096)
Loans returned to accrual (1,640) -
- -----------------------------------------------------------------------------------
Balance at December 31 $ 3,320 $ 4,817
- -----------------------------------------------------------------------------------
CHANGES IN OREO
<CAPTION>
- -----------------------------------------------------------------------------------
(in thousands) 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $2,000 $ 840
Additions 758 1,622
Sales (1,233) (339)
Charge-offs and write-downs (283) (123)
- -----------------------------------------------------------------------------------
Balance at December 31 $1,242 $ 2,000
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEPOSITS
Deposits are the largest component of the Company's liabilities and
account for the greatest portion of interest expense. At December
31, 1996, total deposits were $916.3 million an increase of 5.0%
from December 31, 1995. Average deposits for 1996 of $916.7 million
were 8.1% higher than averages for 1995. The preceding Table 1
presents average deposits with accompanying average rates.
<TABLE>
TABLE 13
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Within three months $154,328 $100,430
After three but within six months 24,820 10,162
After six but within twelve months 5,994 6,949
After twelve months 6,201 8,552
- -------------------------------------------------------------------------------------
Total $191,343 $126,093
- -------------------------------------------------------------------------------------
</TABLE>
BORROWED FUNDS
Short-term borrowings include federal funds purchased, securities
sold under agreement to repurchase, and other short-term borrowings
which consist primarily of FHLB advances with an original maturity
of one day up to one year. Other borrowings includes a 366 day
advance, hence one day longer than would qualify for short-term
classification, maturing in 1997. There was little change in
borrowed funds from 1995 to 1996 as amounts totaled $108.4 million
and $119.0 million at December 31, 1996 and 1995, respectively.
In 1995, the Company granted its then Chairman stock options in
connection with the discharge of severance obligations of the
Company and the Bank under his employment agreement. The agreement
issued options covering 136,437 and 28,593 shares with exercise
prices of $14.69 and $15.33, respectively, and an expiration date of
II-14
<PAGE>
January 31, 1997 (the number of shares under option and the option
price per share have been adjusted for stock dividends). The Company
filed a registration statement relating to these option shares which
will be issued, upon payment of the exercise price, from authorized,
but unissued common stock, or shares held in the treasury. These
stock options do not serve to reduce the number available under the
previously mentioned Plans. The former Chairman exercised 1,000
options in November 1996 and 164,030 in January 1997 resulting in no
further shares available for exercise. Shares were issued from
authorized, but unissued common stock.
CAPITAL AND DIVIDENDS
<TABLE>
TABLE 14
CAPITAL MEASUREMENTS
<CAPTION>
- ---------------------------------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 leverage ratio 8.70% 8.80%
Tier 1 capital ratio 14.06% 15.21%
Total risk-based capital ratio 15.31% 16.46%
Cash dividends as a percentage of net income 36.10% 42.47%
Per common share:
Book value $12.72 $12.44
Tangible book value $11.52 $11.11
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
TABLE 15
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------
(restated to give retroactive effect to stock dividends)
CASH Cash
DIVIDENDS Dividends
QUARTER ENDING HIGH LOW CLOSE DECLARED High Low Close Declared
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 $16.22 $15.24 $16.19 $0.124 $15.42 $14.51 $14.51 $0.109
June 30 16.67 15.60 15.60 0.124 14.96 14.29 14.74 0.109
September 30 16.43 15.00 16.07 0.124 15.19 14.29 14.96 0.109
December 31 19.00 16.07 18.00 0.150 17.14 14.51 16.67 0.123
- -----------------------------------------------------------------------------------------------------
For the year $19.00 $15.00 $18.00 $0.522 $17.14 $14.29 $16.67 $0.450
- -----------------------------------------------------------------------------------------------------
</TABLE>
On a per share basis, cash dividends declared have been
increased both in 1996 and 1995. These dividend increases reflect
the Company's earnings and capital strength. The Company does not
have a target dividend payout ratio, rather the Board of Directors
considers the Company's earnings position and earnings potential
when making dividend decisions. Additionally, 1996 was the thirty-
seventh consecutive year that the Company declared a stock dividend.
The accompanying table, Quarterly Common Stock and Dividend
Information, sets forth the high, low and closing sales price for
the common stock as reported on the NASDAQ National Market System,
and cash dividends declared per share of common stock. At December
31, 1996, the total market capitalization of the Company's common
stock was approximately $150 million compared with $145 million at
December 31, 1995. The change in market capitalization is due to
changes in the market price net of increased shares held in
treasury. The Company's price to book value ratio was 1.42, 1.34,
and 1.34 at December 31, 1996, 1995 and 1994, respectively. The
Company's price was 13, 16, and 20 times earnings at December 31,
1996, 1995 and 1994, respectively.
Capital is an important factor in ensuring the safety of
depositors' accounts. During both 1996 and 1995, the Company earned
the highest possible national safety and soundness rating from two
national bank rating services, Bauer Financial Services and
Veribanc, Inc. Their ratings are based on capital levels, loan
portfolio quality, and security portfolio strength.
The Company remains well capitalized as depicted by the capital
ratios in the table. Capital measurements are significantly in
excess of both regulatory minimum guidelines and meet the
requirements to be considered well capitalized for all periods
presented. Tier 1 and Total Risk-Based Capital ratios have
regulatory minimum guidelines of 4% and 8%, respectively, with
requirements to be considered well capitalized of 6% and 10%,
respectively.
II-15
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objectives of asset and liability management are to
provide for the safety of depositor and investor funds, assure
adequate liquidity, and maintain an appropriate balance between
interest sensitive earning assets and interest bearing liabilities.
Liquidity management involves the ability to meet the cash flow
requirements of customers who may be depositors wanting to withdraw
funds or borrowers needing assurance that sufficient funds will be
available to meet their credit needs. The Asset/Liability Management
Committee (ALCO) is responsible for liquidity management and has
developed guidelines which cover all assets and liabilities, as well
as off balance sheet items that are potential sources or uses of
liquidity. Liquidity must also provide the flexibility to implement
appropriate strategies and tactical actions. Requirements change as
loans grow, deposits and securities mature, and payments on
borrowings are made. Interest rate sensitivity management seeks to
avoid widely fluctuating net interest margins and to ensure
consistent net interest income through periods of changing economic
conditions.
Given the above, liquidity to the Company is defined as the
ability to raise cash quickly at a reasonable cost without principal
loss. The primary liquidity measurement the Company utilizes is
called the Basic Surplus which captures the adequacy of its access
to reliable sources of cash relative to the stability of its funding
mix of average liabilities. This approach recognizes the importance
of balancing levels of cash flow liquidity from short and long term
securities with the availability of dependable borrowing sources
which can be accessed when necessary. Accordingly, the Company has
established borrowing facilities with other banks (federal funds),
the Federal Home Loan Bank of New York (short and long-term
borrowings which are denoted as advances), and repurchase agreements
with investment companies.
This Basic Surplus approach enables the Company to adequately
manage liquidity from both tactical and contingency perspectives. By
tempering the need for cash flow liquidity with reliable borrowing
facilities, the Company is able to operate with a more fully
invested and, therefore, higher interest income generating,
securities portfolio. The makeup and term structure of the
securities portfolio is, in part, impacted by the overall interest
rate sensitivity of the balance sheet. Investment decisions and
deposit pricing strategies are impacted by the liquidity position.
At December 31, 1996 and 1995, the Company's Basic Surplus
ratios (net access to cash and secured borrowings as a percentage of
total assets) were approximately 12% and 17%, respectively, compared
to the present internal minimum guideline range of 5% to 7%. The
December 31, 1996 Basic Surplus ratio was in excess of the
guidelines. During 1995, the Company took steps to absorb its
substantial capacity to support income yielding assets, utilizing,
and therefore reducing, its Basic Surplus ratio. The Company had
unused lines of credit available totalling $407 million to meet its
short-term liquidity needs at December 31, 1996 and considered the
Basic Surplus adequate to meet liquidity needs.
Interest rate risk is determined by the relative sensitivities
of earning asset yields and interest bearing liability costs to
changes in interest rates. Overnight federal funds on which rates
change daily and loans which are tied to the prime rate differ
considerably from long-term investment securities and fixed rate
loans. Similarly, time deposits over $100,000 and money market
deposit accounts are much more interest sensitive than NOW and
savings accounts.
The method by which banks evaluate interest rate risk is to look
at the interest sensitivity gap, the difference between interest
sensitive assets and interest sensitive liabilities repricing during
the same period, measured at a specific point in time. The funding
matrix depicted in the accompanying table is utilized as a primary
tool in managing interest rate risk. The matrix arrays repricing
opportunities along a time line for both assets and liabilities. The
time line for sources of funds, liabilities and equity, is depicted
on the left hand side of the matrix. The longest term, most fixed
rate sources, are presented in the upper left hand corner while the
shorter term, most variable rate items, are at the lower left.
Similarly, uses of funds, assets, are arranged across the top moving
from left to right.
The body of the matrix is derived by allocating the longest
fixed rate funding sources to the longest fixed rate assets (upper
left corner) and shorter term variable sources to shorter term
variable uses (lower right corner). The result is a graphical
depiction of the time periods over which the Company is expected to
experience exposure to rising or falling rates. Since the scales of
the liability (left) and asset (top) sides are identical, all
numbers in the matrix would fall within the diagonal lines if the
Company was perfectly matched across all repricing time frames.
Numbers outside the diagonal lines represent two general types of
mismatches: i) liability sensitive, where rate sensitive liabilities
exceed the amount of rate sensitive assets repricing within
applicable time frames (items to the left of/below the diagonal
lines) and ii) asset sensitive, where rate sensitive assets exceed
the amount of rate sensitive liabilities repricing within applicable
time frames (items to the right of/above the diagonal lines).
Generally, the lower the amount of this gap, the less sensitive
are earnings to interest rate changes. The matrix indicates that the
Company is structurally asset sensitive and supports management's
contention that the Company is positioned to benefit from a higher
II-16
<PAGE>
interest rate environment. The nature and timing of the benefit will
be initially impacted by the extent to which core deposit and
borrowing rates are increased as rates rise.
While the static gap evaluation of interest rate sensitivity is
useful, it is not indicative of the impact of fluctuating interest
rates on net interest income. Once the Company determines the extent
of gap sensitivity, the next step is to quantify the potential
impact of the interest sensitivity on net interest income. The
Company runs various earnings simulation scenarios used to evaluate
the effect on net interest income in a rising or declining rate
environment over an extended time horizon. At December 31, 1996, a
100 basis point gradual increase or decline in interest rates was
estimated to have less than a 1.5% impact on net interest income
relative to a flat rate environment over the next twelve month
period.
<TABLE>
TABLE 16
SUMMARY STATIC GAP FUNDING MATRIX
(in millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
(ASSETS) OVER 60 37-60 25-36 13-24 7-12 4-6
-USES- MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MAR 97 FEB 97 JAN 97 ONE DAY TOTALS
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES 249 135 93 109 115 75 18 22 321 2 1,139
-SOURCES- TOTALS
- --------------------------------------------------------------------------------------------------------------------------
OVER 60 472 249 135 88 Long Liabilities 472
MONTHS Short Assets
37-60 15 5 10 15
MONTHS
25-36 16 16 16
MONTHS
13-24 51 51 51
MONTHS
7-12 87 32 55 87
MONTHS
4-6 70 60 10 70
MONTHS
MAR 97 117 65 18 22 12 117
FEB 97 43 43 43
JAN 97 220 Long Assets 220 220
Short Liabilities
ONE DAY 48 46 2 48
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 1,139 249 135 93 109 115 75 18 22 321 2 1,139
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers of Servicing of Financial Assets and
extinguishment of Liabilities." SFAS No. 125 provides accounting and
reporting standards for transfers of servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1996
and is based on a consistent application of a financial-components
approach that focuses on control. The statement provides consistent
standards for distinguishing transfers of financial assets that are
sales, from transfers that are secured borrowings. In December 1996,
the FASB deferred for one year the effective date of SFAS 125 as it
relates to transfers of financial assets and secured borrowings and
collateral. The Company will prospectively adopt SFAS No. 125
effective January 1, 1997 and management does not believe the
adoption will have a material impact on the Company's financial
condition or results of operations.
FOURTH QUARTER RESULTS
Selected quarterly results are presented in Table 17, Selected
Quarterly Financial Data. Quarterly net income for the fourth
quarter of 1996 achieved the second highest level in the Company's
history, exceeded only by the prior quarters results. Net income for
the fourth quarter 1996 of $3.2 million, $0.38 per share, was up
II-17
<PAGE>
$0.6 million or 24.5% from the $2.6 million, $0.29 per share, earned
in the fourth quarter 1995. Average earning assets for the fourth
quarter 1996 were $61 million, or 6.0%, higher than for the fourth
quarter 1995, and average loans increased 9.4% from an average of
$588 million for the fourth quarter 1995 to $643 million for the
fourth quarter of 1996.
All performance ratios for the fourth quarter 1996 reflected
improvement over fourth quarter 1995 ratios. The 1996 fourth quarter
return on average assets of 1.12% exceeded the comparable 1995 ratio
of .95%, an 18% improvement. The return on average equity for the
fourth quarter 1996 of 12.11% is 24.3% higher than the fourth
quarter 1995 ratio of 9.74%. Expense and efficiency ratios of 2.33%
and 58.52%, respectively, for the fourth quarter 1996, improved over
the comparable 1995 ratios of 2.45% and 65.02%.
<TABLE>
TABLE 17
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands,
except per share data) FIRST SECOND THIRD FOURTH First Second Third Fourth
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest and fee income $20,003 $20,815 $21,678 $21,891 $17,942 $19,143 $19,983 $20,332
Interest expense 8,670 9,007 9,367 9,321 7,981 8,566 8,942 9,351
Net interest income 11,333 11,808 12,311 12,570 9,961 10,577 11,041 10,981
Provision for loan losses 600 700 875 1,000 330 508 340 375
Noninterest income excluding
securities gains 1,792 1,848 1,932 2,111 1,767 1,743 1,704 1,743
Securities gains (losses) 792 219 194 (26) - 11 82 52
Noninterest expense 8,586 8,636 8,460 8,740 8,413 8,235 8,115 8,261
Net income 2,911 2,737 3,338 3,193 1,907 2,221 2,637 2,564
Net income per common share $ 0.34 $ 0.32 $ 0.39 $ 0.38 $ 0.22 $ 0.25 $ 0.30 $ 0.29
Net interest margin 4.66% 4.64% 4.70% 4.77% 4.30% 4.49% 4.54% 4.40%
Return on average assets 1.09% 0.99% 1.18% 1.12% 0.76% 0.87% 1.00% 0.95%
Return on average equity 10.94% 10.90% 13.28% 12.11% 7.83% 8.79% 10.28% 9.74%
Average common
shares outstanding 8,685 8,547 8,404 8,422 8,877 8,844 8,753 8,727
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-18
<PAGE>
<TABLE>
PROPERTIES
The Bank operates the following community banking offices:
Date Square
Name of Office Location County Established Footage
<S> <C> <C> <C> <C>
Norwich 52 S. Broad St., Norwich, NY Chenango 07-15-1856 77,000
Afton 182 Main St., Afton, NY Chenango 09-01-1962 2,779
Bainbridge 9 N. Main St., Bainbridge, NY Chenango 12-07-1938 4,897
Deposit 105 Front St., Deposit, NY Broome 02-12-1971 3,550
Earlville 2 S. Main St., Earlville, NY Chenango 08-07-1937 1,222
Grand Gorge Rt. 23 & 30, Grand Gorge, NY Delaware 11-01-1957 3,000
Margaretville Main St., Margaretville, NY Delaware 09-03-1963 3,152
New Berlin 2 S. Main St., New Berlin, NY Chenango 12-21-1946 2,195
Sherburne 30 N. Main St., Sherburne, NY Chenango 08-07-1937 3,393
South Otselic Gladding St., S. Otselic, NY Chenango 10-01-1945 1,326
North Plaza Rt. 12 & 320, Norwich, NY Chenango 10-15-1986 1,849
South Plaza Rt. 12 S., Norwich, NY Chenango 08-20-1986 1,200
Newark Valley 2 N. Main St., Newark Valley, NY Tioga 10-01-1973 3,893
Maine 67 Main St., Maine, NY Broome 10-01-1973 1,458
Hobart Maple Ave., Hobart, NY Delaware 06-28-1974 2,308
Sidney 13 Division St., Sidney, NY Delaware 12-31-1978 3,500
Oxford State St., Oxford, NY Chenango 08-01-1984 3,559
Greene 80 S. Chenango St., Greene, NY Chenango 12-15-1986 3,200
Hancock 1 E. Main St., Hancock, NY Delaware 10-01-1989 7,500
Hamden Rt. 10, Hamden, NY Delaware 10-01-1989 1,250
Gloversville 199 Second Ave. Ext., Gloversville, NY Fulton 10-01-1989 4,263
Northville 192 N. Main St., Northville, NY Fulton 10-01-1989 3,000
Vail Mills Rt. 30, Vail Mills, NY Fulton 10-01-1989 1,000
Clinton 1 Kirkland Ave., Clinton, NY Oneida 10-01-1989 7,960
New Hartford 8549 Seneca Turnpike, New Hartford, NY Oneida 12-16-1995 4,179
Rome Westgate Plaza, Erie Blvd. W., Rome, NY Oneida 10-01-1989 1,950
Lake Placid 81 Main St., Lake Placid, NY Essex 10-01-1989 8,500
Cold Brook Plaza Saranac Ave., Lake Placid, NY Essex 10-01-1989 1,300
Saranac Lake 2 Lake Flower Ave., Saranac Lake, NY Essex 10-01-1989 2,400
Binghamton 1256 Front St., Binghamton, NY Broome 03-29-1993 1,900
Plattsburgh 30 Brinkerhoff St., Plattsburgh, NY Clinton 05-28-1993 4,396
Plattsburgh North Rt. 9, Plattsburgh, NY Clinton 08-28-1993 3,000
Ellenburg Depot 5084 Rt. 11, Ellenburg Depot, NY Clinton 08-28-1993 2,346
Utica Business Pk 555 French Road, New Hartford, NY Oneida 10-01-1994 3,396
Utica Downtown 162 Genesee St., Utica, NY Oneida 12-16-1995 4,350
<FN>
The South Otselic, Binghamton, Vail Mills, Plattsburgh North, Rome, Utica Downtown Business
Park and Utica Offices are leased. All other banking premises are owned by the Bank. The Bank
also has free-standing automated banking units. The Bank has notified the Office of the
Comptroller of the Currency and the appropriate customers the Utica Downtown Office will be
closing on March 28, 1997.
</FN>
</TABLE>
II-19
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
- ---------------------------------------------------------------------------------------------
(in thousands, except per share data) 1996 1995 % CHANGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
Interest and fee income $ 84,387 $ 77,400 9.0%
Interest expense 36,365 34,840 4.4%
Net interest income 48,022 42,560 12.8%
Provision for loan losses 3,175 1,553 104.4%
Noninterest income 8,862 7,102 24.8%
Noninterest expense 34,422 33,024 4.2%
Net income 12,179 9,329 30.5%
- ---------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income $ 1.43 $ 1.06 34.9%
Cash dividends $ 0.522 $ 0.450 16.0%
Book value at year end $ 12.72 $ 12.44 2.3%
Tangible book value at year end $ 11.52 $ 11.11 3.7%
Average common shares outstanding 8,513,016 8,799,728 (3.3%)
Market price:
High $ 19.00 $ 17.14 10.9%
Low $ 15.00 $ 14.29 5.0%
End of year $ 18.00 $ 16.67 8.0%
- ---------------------------------------------------------------------------------------------
AT YEAR END
Assets $ 1,138,986 $ 1,106,266 3.0%
Earning assets 1,073,705 1,024,534 4.8%
Loans 654,593 588,385 11.3%
Allowance for loan losses 10,473 9,120 14.8%
Deposits 916,319 873,032 5.0%
Stockholders' equity 106,264 108,044 (1.6%)
Common shares outstanding 8,356,988 8,685,641 (3.8%)
- ---------------------------------------------------------------------------------------------
AVERAGE BALANCES
Assets $ 1,110,968 $ 1,042,198 6.6%
Earning assets 1,043,425 977,738 6.7%
Loans 617,810 575,736 7.3%
Deposits 916,683 848,289 8.1%
Stockholders' equity 103,240 101,630 1.6%
- ---------------------------------------------------------------------------------------------
ASSET QUALITY
Allowance to loans 1.60% 1.55% 3.2%
Nonperforming assets to assets 0.40% 0.62% (35.5%)
Allowance to nonperforming loans 315% 189% 66.7%
- ---------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 1.10% 0.90% 22.2%
Return on average equity 11.80% 9.18% 28.5%
Net interest margin 4.69% 4.43% 5.9%
Tier 1 leverage ratio 8.70% 8.80% (1.1%)
Tier 1 risk-based capital ratio 14.06% 15.21% (7.6%)
Total risk-based capital ratio 15.31% 16.46% (7.0%)
- ---------------------------------------------------------------------------------------------
All per share data has been restated to give retroactive effect to stock dividends.
</TABLE>
II-20
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Responsibility for the integrity, objectivity, consistency, and
fair presentation of the financial information presented in this
Annual Report rests with NBT Bancorp Inc. management. The
accompanying financial statements and related information have been
prepared in conformity with generally accepted accounting principles
consistently applied and include, where required, amounts based on
informed judgments and management's best estimates. Management
maintains a system of internal controls and accounting policies and
procedures to provide reasonable assurance of the accountability and
safeguarding of Company assets and of the accuracy of financial
information. These procedures include management evaluations of
asset quality and the impact of economic events, organizational
arrangements that provide an appropriate segregation of
responsibilities and a program of internal audits to evaluate
independently the adequacy and application of financial and
operating controls and compliance with Company policies and
procedures.
The Board of Directors has appointed an Audit Committee composed
entirely of directors who are not employees of the Company. The
Audit Committee is responsible for recommending to the Board the
independent auditors to be retained for the coming year, subject to
stockholder ratification. The Audit Committee meets periodically,
both jointly and privately, with the independent auditors, with our
internal auditors, as well as with representatives of management, to
review accounting, auditing, internal control structure and
financial reporting matters. The Committee reports to the Board on
its activities and findings.
/s/DARYL R. FORSYTHE
Daryl R. Forsythe
President and Chief Executive Officer
/s/JOE C. MINOR
Joe C. Minor
Vice President
Chief Financial Officer and Treasurer
II-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
NBT Bancorp Inc.:
We have audited the accompanying consolidated balance sheets of
NBT Bancorp Inc. and subsidiary as of December 31, 1996 and 1995,
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three year period
ended December 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of NBT Bancorp Inc. and subsidiary as of December 31, 1996
and 1995, and the results of their operations and their cash flows
for each of the years in the three year period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Syracuse, New York
January 17, 1997
II-22
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1996 1995
(in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 35,790 $ 44,379
Loans available for sale 4,135 6,089
Securities available for sale, at fair value 369,202 393,536
Securities held to maturity
(fair value-$42,238 and $40,306) 42,239 40,311
Loans:
Commercial and agricultural 281,991 247,320
Real estate mortgage 119,870 120,972
Consumer 252,732 220,093
- --------------------------------------------------------------------------------------------------------
Total loans 654,593 588,385
Less allowance for loan losses 10,473 9,120
- --------------------------------------------------------------------------------------------------------
Net loans 644,120 579,265
Premises and equipment, net 16,307 16,467
Intangible assets, net 9,953 11,551
Other assets 17,240 14,668
- --------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,138,986 $1,106,266
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (noninterest bearing) $ 122,115 $ 131,227
Savings, NOW, and money market 359,141 352,221
Time 435,063 389,584
- --------------------------------------------------------------------------------------------------------
Total deposits 916,319 873,032
Short-term borrowings 88,244 115,945
Other borrowings 20,195 3,012
Other liabilities 7,964 6,233
- --------------------------------------------------------------------------------------------------------
Total liabilities 1,032,722 998,222
- --------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00;
shares authorized-2,500,000 - -
Common stock, no par, stated value $1.00;
shares authorized-12,500,000; shares
issued 8,838,437 and 8,864,430 8,838 8,442
Capital surplus 82,731 75,464
Retained earnings 24,208 24,076
Unrealized gain (loss) on securities available
for sale, net of income tax effect (1,529) 2,822
Common stock in treasury at cost,
481,449 and 170,275 shares (7,984) (2,760)
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 106,264 108,044
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,138,986 $1,106,266
- --------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
II-23
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Interest and fee income:
Loans and loans available for sale $57,660 $53,602 $49,486
Securities - taxable 25,109 22,277 19,672
Securities - tax exempt 1,527 1,375 1,170
Other 91 146 110
- --------------------------------------------------------------------------------------------------------
Total interest and fee income 84,387 77,400 70,438
- --------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 31,942 29,683 21,483
Short-term borrowings 3,745 4,700 3,351
Other borrowings 678 457 908
- --------------------------------------------------------------------------------------------------------
Total interest expense 36,365 34,840 25,742
- --------------------------------------------------------------------------------------------------------
Net interest income 48,022 42,560 44,696
Provision for loan losses 3,175 1,553 3,071
- --------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 44,847 41,007 41,625
- --------------------------------------------------------------------------------------------------------
Noninterest income:
Trust income 2,642 2,439 2,511
Service charges on deposit accounts 3,372 2,995 3,032
Securities gains 1,179 145 555
Other income 1,669 1,523 941
- --------------------------------------------------------------------------------------------------------
Total noninterest income 8,862 7,102 7,039
- --------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 17,817 16,309 16,157
Net occupancy expense 2,391 2,361 2,295
Equipment expense 1,765 1,694 2,033
FDIC insurance 2 941 1,829
Amortization of intangible assets 1,580 1,271 3,222
Restructuring expense - - 2,264
Other operating expense 10,867 10,448 10,874
- --------------------------------------------------------------------------------------------------------
Total noninterest expense 34,422 33,024 38,674
- --------------------------------------------------------------------------------------------------------
Income before income taxes 19,287 15,085 9,990
Income taxes 7,108 5,756 3,482
- --------------------------------------------------------------------------------------------------------
NET INCOME $12,179 $ 9,329 $ 6,508
- --------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 1.43 $ 1.06 $ 0.73
- --------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 8,513 8,800 8,939
- --------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
II-24
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Unrealized
Gain(Loss)
On Securities
Common Capital Retained Available Treasury
Stock Surplus Earnings For Sale Stock Total
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $7,668 $64,518 $28,431 $ 769 $ (278) $101,108
Net income 6,508 6,508
5% stock dividend 380 5,508 (5,888) -
Cash dividends - $0.407 per share (3,594) (3,594)
Payment in lieu of fractional shares (11) (11)
Common stock issued to dividend
reinvestment and other stock plans 2 29 31
Purchase of 210,911 treasury shares (3,555) (3,555)
Sale of 190,456 treasury shares to
dividend reinvestment and other
stock plans (386) 3,248 2,862
Unrealized loss on securities
available for sale, net of tax
effect of $3,503 (5,042) (5,042)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 8,050 69,669 25,446 (4,273) (585) 98,307
Net income 9,329 9,329
5% stock dividend 392 6,333 (6,725) -
Cash dividends - $0.450 per share (3,962) (3,962)
Payment in lieu of fractional shares (12) (12)
Purchase of 436,293 treasury shares (7,075) (7,075)
Sale of 302,147 treasury shares to
dividend reinvestment and other
stock plans (538) 4,900 4,362
Unrealized gain on securities
available for sale, net of tax
effect of $4,900 7,095 7,095
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 8,442 75,464 24,076 2,822 (2,760) 108,044
Net income 12,179 12,179
5% stock dividend 396 7,254 (7,650) -
Cash dividends - $0.522 per share (4,384) (4,384)
Payment in lieu of fractional shares (13) (13)
Purchase of 433,848 treasury shares (7,241) (7,241)
Sale of 122,675 treasury shares to
dividend reinvestment and other
stock plans 13 2,017 2,030
Unrealized loss on securities
available for sale, net of tax
effect of $3,005 (4,351) (4,351)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $8,838 $82,731 $24,208 $(1,529) $(7,984) $106,264
- --------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
II-25
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
OPERATING ACTIVITIES:
Net income $ 12,179 $ 9,329 $ 6,508
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 3,175 1,553 3,071
Depreciation and amortization of premises
and equipment 1,513 1,478 1,636
Amortization of premiums and accretion of
discounts on securities 254 (153) 402
Amortization of intangible assets 1,580 1,271 3,222
Deferred income tax benefit (660) (288) (194)
Provisions for restructuring charges - - 2,264
Proceeds from sale of loans originated for sale 4,268 14,704 12,358
Loans originated for sale (4,089) (11,872) (13,921)
Realized gains on sales of securities (1,179) (145) (555)
(Increase) decrease in interest receivable 1,048 450 (2,137)
Increase in interest payable 1 676 175
Payments of restructuring liabilities - (1,513) (613)
Other, net 2,973 1,827 (25)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,063 17,317 12,191
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities 43,924 40,206 21,504
Proceeds from sales 217,134 2,808 70,258
Purchases (244,333) (99,030) (1,001)
Securities held to maturity:
Proceeds from maturities 31,811 59,918 30,468
Purchases (33,741) (44,682) (194,650)
Net increase in loans (66,255) (15,126) (17,555)
Purchase of premises and equipment, net (1,353) (2,020) (2,034)
Acquisition of branches, net of cash acquired - (2,960) -
- -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (52,813) (60,886) (93,010)
- -----------------------------------------------------------------------------------------------------------
<PAGE>
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 43,287 81,589 (15,785)
Net increase (decrease) in short-term borrowings (27,701) (24,642) 113,886
Proceeds from issuance of other borrowings 20,050 - -
Repayments of other borrowings (2,867) (5,722) (5,723)
Common stock issued, including treasury shares reissued 2,030 4,362 2,893
Purchase of treasury stock (7,241) (7,075) (3,555)
Cash dividends and payment for fractional shares (4,397) (3,974) (3,605)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 23,161 44,538 88,111
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (8,589) 969 7,292
Cash and cash equivalents at beginning of year 44,379 43,410 36,118
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 35,790 $ 44,379 $ 43,410
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 36,364 $ 34,164 $ 25,567
Income taxes 7,569 5,791 3,941
Noncash investing activity:
Transfer of loans available for sale to loans held
to maturity 1,775 - -
Transfer of securities held to maturity to securities
available for sale - 220,681 -
- -----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
II-26
<PAGE>
NBT BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NBT Bancorp Inc. (Bancorp) and its subsidiary follow generally accepted
accounting principles and reporting practices applicable to the banking
industry. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from these estimates. The following is a description of
significant policies and practices:
CONSOLIDATION The consolidated financial statements include the
accounts of Bancorp and its wholly owned subsidiary, NBT Bank, N.A.
(Bank) collectively referred to herein as the Company. All significant
intercompany transactions have been eliminated in consolidation.
Certain amounts previously reported in the financial statements have
been reclassified to conform with the current presentation.
BUSINESS The Bank provides loan and deposit services to its customers,
primarily in its eight county service area. Its only business segment
is domestic commercial banking and the Bank is subject to competition
from other financial institutions. The Bank and the Company are subject
to the regulations of certain federal agencies and undergo periodic
examinations by those regulatory agencies.
TRUST Assets held by the Bank in a fiduciary or agency capacity for
its customers are not included in the accompanying consolidated balance
sheets, since such assets are not assets of the Bank. Trust income is
recognized on the accrual method based on contractual rates applied to
the balances of trust accounts.
CASH AND CASH EQUIVALENTS The Company considers cash on hand, amounts
due from correspondent banks, cash items in process of collection, and
federal funds sold, as well as federal mutual funds, to be cash and
cash equivalents.
SECURITIES The Company classifies its debt securities at date of
purchase as either available for sale or held to maturity as the
Company does not hold any securities considered to be trading. Held to
maturity securities are those that the Company has the ability and
intent to hold until maturity. All other securities not included as
held to maturity are classified as available for sale.
Available for sale securities are recorded at fair value. Held to
maturity securities are recorded at amortized cost. Unrealized holding
gains and losses, net of the related tax effect, on available for sale
securities are excluded from earnings and are reported as a separate
component of stockholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date
of transfer. A decline in the fair value of any available for sale or
held to maturity security below cost that is deemed other than
temporary is charged to earnings resulting in the establishment of a
new cost basis for the security.
Premiums and discounts are amortized or accredited over the life of the
related security as an adjustment to yield using the interest method.
Dividends and interest income are recognized when earned. Realized
gains and losses on securities sold are derived using the specific
identification method for determining the cost of securities sold.
LOANS AND LOANS AVAILABLE FOR SALE Loans are recorded at their current
unpaid principal balance, net of unearned income. Loans classified as
available for sale, primarily higher education loans, are carried at
the lower of aggregate cost or estimated fair value. Interest income
on loans is primarily accrued based on the principal amount
outstanding.
The Bank's classification of a loan as a nonaccrual loan is based
in part on bank regulatory guidelines. Nonaccrual classification does
not mean that the loan principal will not be collected; rather, that
timely collection of interest is doubtful. When in the opinion of
management the collection of principal appears unlikely, the loan
balance is charged-off in total or in part. Loans are transferred to
a nonaccrual basis generally when principal or interest payments become
ninety days delinquent, unless the loan is well secured and in the
process of collection, or when management concludes circumstances
indicate that borrowers may be unable to meet contractual principal or
interest payments. Accrual of interest is discontinued if the loan is
placed on nonaccrual status. When a loan is transferred to a nonaccrual
status, any unpaid accrued interest is reversed and charged against
income.
II-27
<PAGE>
Management, considering current information and events regarding
the borrowers' ability to repay the obligations, considers a loan to
be impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair
value of collateral if the loan is collateral dependent. Impairment
losses are included in the allowance for loan losses through a charge
to the provision for loan losses.
Payments received on nonaccrual and impaired loans are first
applied to principal. Depending on management's assessment of the
ultimate collectiblity of the loan, interest income may be recognized
on a cash basis. Nonaccrual loans are returned to accrual status when
management determines that the financial condition of the borrower has
improved significantly to the extent that there has been a sustained
period of repayment performance so that the loan is brought current and
the collectibility of both principal and interest appears assured.
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing
Rights," on a prospective basis. SFAS No. 122 requires the Company to
recognize rights to service mortgage loans for others as separate
assets however those servicing rights are acquired. It also requires
the Company to assess its capitalized mortgage servicing rights for
impairment based on the fair value of those rights. The adoption of
SFAS No. 122 did not have a material impact on the Company's financial
condition or results of operations.
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is the amount
which, in the opinion of management, is necessary to absorb potential
losses in the loan portfolio when taken as a whole. The allowance is
determined by reference to the market area the Bank serves, local
economic conditions, the growth and composition of its loan portfolio
with respect to the mix between the various types of loans and their
related risk characteristics, a review of the value of collateral
supporting the loans, and the result of comprehensive reviews of the
loan portfolio by the Loan Review staff and management.
BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated at
cost, less accumulated depreciation. Depreciation of premises and
equipment is determined using the straight line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance, repairs, and minor replacements are charged to expense as
incurred. Gains and losses on the disposal of bank premises and
equipment are included in the results of current operations.
OTHER REAL ESTATE OWNED Other real estate owned (OREO) consists of
properties acquired through foreclosure or by acceptance of a deed in
lieu of foreclosure. These assets are recorded at the lower of cost or
appraised fair value, less estimated costs of disposal. Loan losses
arising from the acquisition of such assets are charged to the
allowance for loan losses and any subsequent valuation write-downs are
charged to other expense. Operating costs associated with the
properties are charged to expense as incurred. Gains on the sale of
OREO are included in income when title has passed and the sale has met
the minimum down payment requirements prescribed by Generally Accepted
Accounting Principals.
INTANGIBLE ASSETS Certain identified intangible assets, including a
covenant not to compete and core deposit intangible assets are carried
at appraised fair values, net of accumulated amortization, and are
being amortized by the straight line method in amounts sufficient to
write-off those fair values over their estimated useful lives; such
fair values and useful lives are reviewed annually for events or
changes in circumstances that may indicate that the carrying amount of
the assets are not recoverable. Goodwill, the excess of cost over the
fair value of the net assets acquired, is being amortized over twenty-
five years on the straight line method.
TREASURY STOCK Treasury stock acquisitions are recorded at cost.
Subsequent sales of treasury stock are recorded on an average cost
basis with the difference between proceeds and cost recognized as an
adjustment of capital surplus.
POSTRETIREMENT BENEFITS The Company uses actuarial based accrual
accounting for its postretirement health care plans, electing to
recognize the transition obligation on a delayed basis over the plan
participants' future service periods, estimated to be twenty years.
II-28
<PAGE>
STOCK-BASED COMPENSATION Prior to January 1, 1996, the Company
accounted for its stock option plan in accordance with the provisions
of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price. On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
INCOME TAXES The Company files a consolidated tax return on the
accrual basis. Deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
PER SHARE AMOUNTS Net income per common share is computed on the basis
of the weighted average number of common shares and common share
equivalents outstanding during each period after giving retroactive
effect to stock dividends and stock splits.
FEDERAL RESERVE BOARD REQUIREMENT
The Bank is required to maintain a reserve balance with the Federal
Reserve Bank of New York. The required average total reserve for the
14 day maintenance period ending January 1, 1997, was $9.7 million of
which $1.8 million was required to be on deposit with the Federal
Reserve Bank and the remaining $7.9 million was represented by cash on
hand.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company does not engage in the use of derivative financial
instruments and currently the Company's only financial instruments with
off-balance sheet risk consist of commitments to originate loans and
commitments under unused lines of credit.
<PAGE>
SECURITIES
The amortized cost, estimated fair value and unrealized gains and losses of
securities available for sale are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Amortized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------
U.S. Treasury $ 70,811 $ 61 $ 603 $ 70,269
Federal Agency 94,313 169 922 93,560
State & Municipal 1,450 6 8 1,448
Mortgage-backed 204,889 509 1,825 203,573
Other securities 325 27 - 352
- -----------------------------------------------------------------------------------------------
Total $371,788 $ 772 $3,358 $369,202
- -----------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1995
- -----------------------------------------------------------------------------------------------
U.S. Treasury $169,801 $2,212 $ 105 $171,908
Federal Agency 63,246 1,176 - 64,422
State & Municipal 986 - 13 973
Mortgage-backed 154,409 2,397 923 155,883
Other securities 322 28 - 350
- -----------------------------------------------------------------------------------------------
Total $388,764 $5,813 $1,041 $393,536
- -----------------------------------------------------------------------------------------------
</TABLE>
II-29
<PAGE>
Gross realized gains, gross realized losses and gross proceeds on the
sale of securities available for sale were $1.6 million, $.4 million
and $217.1 million, respectively, in 1996. Gross realized gains and
gross proceeds were $0.1 million and $2.8 million, respectively in
1995, and $0.6 million and $70.3 million in 1994.
At December 31, 1996 and 1995, securities with amortized costs
totalling $316.4 million and $246.4 million, respectively, were pledged
to secure public deposits and for other purposes required or permitted
by law.
The amortized cost, estimated fair value, and unrealized gains and
losses of securities held to maturity are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Amortized Unrealized Fair
(in thousands) Cost Gains Losses Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------
State & Municipal $32,546 $- $- $32,546
Other securities 1,518 - 1 1,517
Federal Home Loan Bank 8,175 - - 8,175
- ------------------------------------------------------------------------------------------
Total $42,239 $- $1 $42,238
- ------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1995
- ------------------------------------------------------------------------------------------
State & Municipal $28,521 $- $4 $28,517
Other securities 1,518 - 1 1,517
Federal Home Loan Bank 10,272 - - 10,272
- ------------------------------------------------------------------------------------------
Total $40,311 $- $5 $40,306
- ------------------------------------------------------------------------------------------
</TABLE>
The Company holds the required investment in Federal Home Loan Bank
stock.
In November 1995, the FASB published "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" (Guide). Concurrent with the initial adoption of the Guide
but no later than December 31, 1995, the Company was permitted to
reassess the appropriateness of the classifications of all securities
held at that time and implement reclassification without calling into
question the intent of the Company to hold other debt securities to
maturity in the future. Effective December 1, 1995 the Company
transferred U.S. Treasury, Federal Agency, and Mortgage-backed
securities with amortized costs totalling $217.2 million, having fair
values of $220.7 million, from the held to maturity portfolio to the
available for sale portfolio. The gross unrealized gains and losses
were $3.7 million and $0.2 million, respectively. The transferred
securities are reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of
stockholders' equity, net of related taxes. As required by the Guide,
financial statements prior to adoption were not restated.
At December 31, 1996 and 1995 substantially all of the mortgage-
backed securities held by the Company were issued or backed by Federal
agencies.
<PAGE>
<TABLE>
REMAINING MATURITIES OF SECURITIES AT DECEMBER 31, 1996
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
After One Year After Five Years
Within But Within But Within After Ten Total
One Year Five Years Ten Years Years Portfolio
(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury $ - -% $ 70,811 5.70% $ - -% $ - -% $ 70,811 5.70%
Federal Agency 16,053 7.52 47,996 7.00 17,584 7.25 12,680 7.41 94,313 7.20
State & Municipal 456 5.03 525 5.38 469 7.28 - - 1,450 5.89
Mortgage-backed - - 10,980 7.09 32,788 6.64 161,121 7.12 204,889 7.04
Other securities - - - - - - 325 3.23 325 3.23
- --------------------------------------------------------------------------------------------------------------------------------
Amortized cost $16,509 7.45% $130,312 6.29% $50,841 6.86% $174,126 7.14% $371,788 6.82%
- --------------------------------------------------------------------------------------------------------------------------------
Fair value $16,416 $129,478 $50,719 $172,589 $369,202
- --------------------------------------------------------------------------------------------------------------------------------
SECURITIES HELD TO MATURITY:
State & Municipal $ 28,315 6.32% $ 3,235 7.83% $ 695 9.90% $ 301 10.09% $ 32,546 6.58%
Other securities - - - - 10 5.50 9,683 6.51 9,693 6.50
- --------------------------------------------------------------------------------------------------------------------------------
Amortized cost $ 28,315 6.32% $ 3,235 7.83% $ 705 9.83% $ 9,984 6.62% $ 42,239 6.57%
- --------------------------------------------------------------------------------------------------------------------------------
Fair value $ 28,315 $ 3,235 $ 704 $ 9,984 $ 42,238
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the tables setting forth the maturity distribution and weighted
average taxable equivalent yield of securities at December 31, 1996,
yields on amortized cost have been calculated based on effective yields
weighted for the scheduled maturity of each security using the marginal
II-30
<PAGE>
federal tax rate of 35%. Approximately $40.6 million of mortgage-backed
debt securities have adjustable interest rate provisions and have been
included in the tables based upon the period that relates to their
adjustable characteristics. Fixed rate mortgage-backed debt securities
are included based on contractual maturity date which may differ from
actual maturity date due to unscheduled customer loan prepayments.
LOANS AVAILABLE FOR SALE
The Company carries loans available for sale at the lower of aggregate
cost or estimated fair value. At December 31, 1996, the aggregate cost
and estimated fair value of loans available for sale were $4.1 million,
while at December 31, 1995 aggregate cost and estimated market value
were $6.1 million.
It is the Company's practice to sell its higher education loans
to the Student Loan Marketing Association at the Company's cost after
the student leaves school. During 1996, $3.8 million of such loans were
sold.
During 1996, $0.4 million in mortgage loans were sold with
servicing retained. At December 31, 1996, the Company serviced $29.6
million of real estate mortgages on behalf or other financial
intermediaries; such loans are not reflected in the Company's balance
sheet.
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three years ended
December 31, 1996, are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 9,120 $ 9,026 $ 8,652
Provision 3,175 1,553 3,071
Recoveries 956 802 1,025
- --------------------------------------------------------------------------------------------
13,251 11,381 12,748
Loans charged off 2,778 2,261 3,722
- --------------------------------------------------------------------------------------------
Balance at December 31 $10,473 $ 9,120 $ 9,026
- --------------------------------------------------------------------------------------------
</TABLE>
NONPERFORMING ASSETS
The Bank's concentrations of credit risk are reflected in the balance
sheet. The concentrations of credit risk with standby letters of
credit, committed lines of credit and commitments to originate new
loans generally follow the loan classifications. A substantial portion
of the Bank's loans are secured by real estate located in central and
northern New York. Accordingly, the ultimate collectiblity of a
substantial portion of the Bank's portfolio is susceptible to changes
in market conditions of those areas. Management is not aware of any
material concentrations of credit to any industry or individual
borrowers.
The effect of nonaccrual loans on interest income for the years
ended December 31, 1996, 1995, and 1994 was not material. The Bank is
not committed to advance additional funds to these borrowers.
Nonaccrual loans were $3.3 million and $4.8 million at December 31,
1996 and 1995, respectively.
Included in impaired loans at December 31, 1996 is $0.6 million
of impaired loans for which the specifically allocated allowance for
loan losses is $0.1 million. Impaired loans at December 31, 1995 were
$1.4 million with a specific allocated allowance of $0.2 million. There
are no impaired loans that do not have a specifically allocated
allowance for loan losses as they have been written down to estimated
fair value or as a result of interest payments applied to reduce
principal. The average investment in impaired loans for the year ended
December 31, 1996 was $1.2 million and $1.5 million for 1995. During
the years ended December 31, 1996 and 1995 the Company recognized $0.5
million and $0.3 million, respectively, of interest income on impaired
loans, all of which was recognized using the cash basis of income
recognition.
RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has made loans at
prevailing rates and terms to directors, officers, and other related
parties. Such loans, in management's opinion, did not present more than
the normal risk of collectiblity or incorporate other unfavorable
features. The aggregate amount of loans outstanding to qualifying
related parties and changes during the years are summarized as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Balance at January 1 $ 3,933 $3,330
New loans 3,417 1,485
Repayments (3,112) (882)
- ----------------------------------------------------------------------
Total $ 4,238 $3,933
- ----------------------------------------------------------------------
</TABLE>
II-31
<PAGE>
PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
December 31, 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Bank premises $19,394 $18,998
Equipment 17,211 16,474
Construction in progress 253 145
- -----------------------------------------------------------------------------
36,858 35,617
Accumulated depreciation 20,551 19,150
- -----------------------------------------------------------------------------
Total premises and equipment $16,307 $16,467
- -----------------------------------------------------------------------------
</TABLE>
Depreciation and amortization of premises and equipment totaled $1.5
million, $1.5 million and $1.6 million in 1996, 1995 and 1994,
respectively.
Rental expense included in operating expense amounted to $0.3
million in 1996, $0.3 million in 1995, and $0.3 million in 1994. The
future minimum rental commitments as of December 31, 1996, for
noncancellable operating leases were as follows: 1997--$0.2 million;
1998--$0.2 million; 1999--$0.1 million; and 2000--and beyond--$0.1
million.
INTANGIBLE ASSETS
The Bank, in a cash transaction, acquired deposits totalling $42.6
million and selected loans totalling $1.1 million, of three branches
from Community Bank Systems Inc. effective December 16, 1995. Also
included were related accrued interest payable and receivable and
premises and equipment, the amounts of which were not material. All
assets and liabilities acquired were recorded at appraised fair values
at that date, creating additional core deposit intangible assets and
goodwill. Branch acquisition costs for 1996 are adjustments or
reclassification of amounts recorded for the December 1995 transaction.
<PAGE>
The table below presents significant balances, amortization and the
respective periods of amortization:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Goodwill (25 yrs.):
Beginning balance $ 6,318 $ 6,544 $ 6,875
Branch acquisition 41 105 -
Amortization (337) (331) (331)
- ------------------------------------------------------------------------------------------------------
Ending balance 6,022 6,318 6,544
- ------------------------------------------------------------------------------------------------------
Covenant not to compete (5 yrs.):
Beginning balance - - 1,335
Amortization - - (1,335)
- ------------------------------------------------------------------------------------------------------
Ending balance - - -
- ------------------------------------------------------------------------------------------------------
Core deposit intangible assets (3-12 yrs.):
Beginning balance 5,233 3,318 4,874
Branch acquisition (59) 2,855 -
Amortization (1,243) (940) (1,556)
- ------------------------------------------------------------------------------------------------------
Ending balance 3,931 5,233 3,318
- ------------------------------------------------------------------------------------------------------
Total intangible assets, net $ 9,953 $11,551 $ 9,862
- ------------------------------------------------------------------------------------------------------
</TABLE>
DEPOSITS
Time deposits of $100,000 or more aggregated $191.3 million at December
31, 1996 and $126.1 million at December 31, 1995. Interest expense on
such deposits was approximately $9.4 million, $8.6 million, and $3.5
million for 1996, 1995, and 1994, respectively.
II-32
<PAGE>
The following table sets forth the maturity distribution of time
certificates of deposit:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
December 31, 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Within one year $351,816 $305,813
After one but within two years 51,478 44,397
After two but within three years 16,579 21,414
After three but within four years 10,414 12,243
After four but within five years 4,679 5,501
After five years 97 216
- ------------------------------------------------------------------------------------
Total $435,063 $389,584
- ------------------------------------------------------------------------------------
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings consist of Federal funds purchased and securities
sold under repurchase agreements, which generally represent overnight
borrowing transactions, and other short-term borrowings, primarily
Federal Home Loan Bank (FHLB) advances, with original maturities of one
year or less. The Bank has unused lines of credit available for short-
term financing of $325 million as well as the capacity for additional
FHLB advances of $82 million at December 31, 1996. Securities
collateralizing repurchase agreements are held in safekeeping by a non-
affiliated financial institutions.
The details of short-term borrowings are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(dollars in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED
Balance at year end $48,000 $78,000 $80,000
Average during the year 30,929 30,682 30,158
Maximum month end balance 56,000 78,000 87,000
Weighted average rate during the year 5.53% 5.99% 4.94%
Weighted average rate at December 31 7.38% 5.73% 5.64%
- ------------------------------------------------------------------------------------------------------
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at year end $40,244 $17,945 $10,587
Average during the year 23,893 16,516 24,418
Maximum month end balance 40,244 20,225 61,370
Weighted average rate during the year 4.32% 5.23% 4.19%
Weighted average rate at December 31 4.43% 4.84% 4.83%
- ------------------------------------------------------------------------------------------------------
OTHER SHORT-TERM BORROWINGS
Balance at year end $ - $20,000 $50,000
Average during the year 18,370 33,398 18,507
Maximum month end balance 50,000 50,000 50,000
Weighted average rate during the year 5.45% 5.98% 4.53%
Weighted average rate at December 31 -% 5.88% 6.13%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OTHER BORROWINGS
Other borrowings consists of obligations having an original maturity
at issuance of more than one year. A summary of other borrowings
follows:
<TABLE>
<CAPTION>
Maturity Interest Year end outstanding
(dollars in thousands) Date Rate 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Company:
Promissory note - 10.89% $ - $2,857
Bank:
FHLB advance 1997 5.59 20,000 -
FHLB advance 2008 5.33 145 155
FHLB advance 2008 7.20 50 -
- -------------------------------------------------------------------------------------------
Total $20,195 $3,012
- -------------------------------------------------------------------------------------------
</TABLE>
FHLB advances are collateralized by the FHLB stock owned by the Bank
and certain of its real estate mortgage loans.
II-33
<PAGE>
INCOME TAXES
Deferred income taxes are recognized for temporary differences between
the financial statement carrying amount and tax basis of assets and
liabilities.
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Income before income taxes $ 7,108 $ 5,756 $ 3,482
Stockholders' equity, capital surplus,
stock options exercised (36) (388) (147)
Stockholders' equity, unrealized gain
(loss) on securities (3,005) 4,900 (3,503)
- --------------------------------------------------------------------------------------------------
Total $ 4,067 $10,268 $ (168)
- --------------------------------------------------------------------------------------------------
</TABLE>
The significant components of income taxes are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Current:
Federal $ 6,331 $ 4,718 $ 2,926
State 1,437 1,326 750
7,768 6,044 3,676
- --------------------------------------------------------------------------------------------------
Deferred:
Federal (472) (237) (171)
State (188) (51) (23)
- --------------------------------------------------------------------------------------------------
(660) (288) (194)
- --------------------------------------------------------------------------------------------------
Total $ 7,108 $ 5,756 $ 3,482
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
December 31, 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Deferred tax assets:
Allowance for loan losses $4,103 $3,557
Unrealized loss on securities available
for sale 1,057 -
Deferred compensation 195 336
Postretirement benefit obligation 557 380
Other 446 191
- -----------------------------------------------------------------------------------------------
Total gross deferred tax assets 6,358 4,464
- -----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Premises and equipment, primarily due to accelerated
depreciation and valuation allowances 582 496
Differences in assigned values and tax bases of
assets recognized in acquisitions 121 247
Undistributed earnings of subsidiary 379 -
Unrealized gain on securities available for sale - 1,950
Securities discount accretion 54 495
Other 279 -
- -----------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 1,415 3,186
- -----------------------------------------------------------------------------------------------
Net deferred tax assets $4,943 $1,276
- -----------------------------------------------------------------------------------------------
</TABLE>
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income
within the carryback period. A valuation allowance is provided when it
is more likely than not that some portion of the deferred tax asset
will not be realized. Based on available evidence, gross deferred tax
assets will ultimately be realized and a valuation allowance was not
deemed necessary.
II-34
<PAGE>
The following is a reconciliation of the provision for income taxes
to the amount computed by applying the applicable Federal statutory
rate of 35% to income before taxes:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Federal income tax at
statutory rate $6,751 $5,280 $3,497
Benefit of federal tax rates
below statutory rate (10) (100) (100)
Tax exempt income (627) (496) (428)
Non-deductible expenses 241 241 212
State taxes, net of
federal tax benefit 812 829 468
Other, net (59) 2 (167)
- ---------------------------------------------------------------------------------------------------
Income taxes $7,108 $5,756 $3,482
- ---------------------------------------------------------------------------------------------------
</TABLE>
NONINTEREST EXPENSE
Included in the other operating expense category are supplies,
communication and promotional expense of $2.6 million, $2.7 million,
and $2.6 million, and professional fees of $2.4 million, $2.4 million,
and $3.0 million, in years 1996, 1995, and 1994, respectively.
Also included in the other operating expense category are data
processing fees of $1.5 million, $1.3 million, and $1.1 million in
years 1996, 1995, and 1994, respectively. The future minimum annual
commitments for data processing services as of December 31, 1996 were
as follows: 1997--$1.4 million; and 1998--$0.9 million. The Company
will require similar data processing services after the existing
contract expires in August, 1998.
RESTRUCTURING EXPENSE
During 1994, the Company implemented a restructuring plan that included
a reduction in work force and the closing of three branch offices.
Charges of $1.2 million related to the termination benefits of 35
employees and exit costs relating to the closure of the three offices
and professional fees related to the terminations totalling $1.1
million, including $0.7 million for the impairment of long-lived
assets, were recognized. Of the activities considered in the exit plan,
all the employees were terminated in 1994. Termination benefits of $1.2
million and exit costs totalling $0.3 million were paid and charged to
the liability for the restructuring plan. Long lived assets were
disposed of at a loss of $0.7 million which was charged to the
valuation allowance related to the restructuring. An adjustment
reversing the remaining $0.1 million restructuring liability for exit
costs was made in 1995 as a reduction in other expense.
COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is a party to financial instruments with off balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. The Bank's exposure to
credit loss in the event of nonperformance by the other party to the
commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The Bank
uses the same credit standards in making commitments and conditional
obligations as it does for on balance sheet instruments. At December
31, 1996, off balance sheet commitments to extend credit for primarily
variable rate loans, amounted to $99.3 million secured by $54.2 million
in collateral value. The amount of standby letters of credit at
December 31, 1996, amounted to $1.9 million secured by $0.2 million in
cash.
At December 31, 1996 and 1995, the Company held no off balance
sheet derivative financial instruments such as interest rate swaps,
forward contracts, futures, options on financial futures, or interest
rate caps and floors, and was not subject to the market risk associated
with such derivative financial instruments.
In the normal course of business there are various outstanding
legal proceedings. In the opinion of management, the aggregate amount
involved in such proceedings is not material to the financial condition
or results of operations of the Company.
STOCKHOLDERS' EQUITY
The Company has a Dividend Reinvestment Plan for stockholders under
which no new shares of common stock were issued in 1996 and 1995. There
were 499,116 shares of common stock reserved for future issuance under
the plan at December 31, 1996 (the number of shares available has been
adjusted for stock dividends and splits).
II-35
<PAGE>
Certain restrictions exist regarding the ability of the Bank to
transfer funds to the Company in the form of cash dividends. The
approval of the Comptroller of the Currency is required to pay
dividends in excess of the Bank's earnings retained in the current year
plus retained net profits for the preceding two years or when the Bank
fails to meet certain minimum regulatory capital standards. At December
31, 1996, the Bank has the ability to pay $9.3 million in dividends to
the Company without obtaining prior regulatory approval. Under the
State of Delaware Business Corporation Law, the Company may declare and
pay dividends either out of accumulated net retained earnings or
capital surplus.
The Company currently is authorized to issue 2.5 million shares of
preferred stock, no par value, $1.00 stated value. The Board of
Directors is authorized to fix the particular designations,
preferences, rights, qualifications, and restrictions for each series
of preferred stock issued. In November 1994, the Company adopted a
Stockholder Rights Plan (Plan) designed to ensure that any potential
acquiror of the Company negotiate with the Board of Directors and that
all Company stockholders are treated equitably in the event of a
takeover attempt. At that time, the Company paid a dividend of one
Preferred Share Purchase Right (Right) for each outstanding share of
common stock of the Company. Similar Rights are attached to each share
of the Company's common stock issued after November 15, 1994, subject
to adjustment. Under the Plan, the Rights will not be exercisable until
a person or group acquires beneficial ownership of 20 percent or more
of the Company's outstanding common stock, begins a tender or exchange
offer for 25 percent or more of the Company's outstanding common stock,
or an adverse person, as declared by the Board of Directors, acquires
10 percent or more of the Company's outstanding common stock.
Additionally, until the occurrence of such an event, the Rights are not
severable from the Company's common stock and, therefore, the Rights
will be transferred upon the transfer of shares of the Company's common
stock. Upon the occurrence of such events, each Right entitles the
holder to purchase one one-hundredth of a share of Series R Preferred
Stock, no par value, and $1.00 stated value per share of the Company
at a price of $100.
The Plan also provides that upon the occurrence of certain
specified events, the holders of Rights will be entitled to acquire
additional equity interests, in the Company or in the acquiring entity,
such interests having a market value of two times the Right's exercise
price of $100. The Rights, which expire November 14, 2004, are
redeemable in whole, but not in part, at the Company's option prior to
the time they are exercisable, for a price of $0.01 per Right.
REGULATORY CAPITAL REQUIREMENTS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the consolidated
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios (set forth in the table below) of total and Tier 1 Capital
to risk-weighted assets, and of Tier 1 capital to average assets.
Management believes, as of December 31, 1996, that the Company and the
Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from The
Office of the Comptroller of the Currency categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as
set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Company and the Bank's actual capital amounts and ratios are
also presented in the following table.
II-36
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
- -----------------------------------------------------------------------------------------------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets):
Company Consolidated $106,559 15.31% $ 55,663 8.00% $ 69,579 10.00%
Bank $104,487 15.03% $ 55,603 8.00% $ 69,504 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Company Consolidated $ 97,840 14.06% $ 27,831 4.00% $ 41,747 6.00%
Bank $ 95,777 13.78% $ 27,802 4.00% $ 41,702 6.00%
Tier 1 Capital (to Average Assets):
Company Consolidated $ 97,840 8.70% $ 44,971 4.00% $ 56,214 5.00%
Bank $ 95,777 8.53% $ 44,910 4.00% $ 56,137 5.00%
- -----------------------------------------------------------------------------------------------------------
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Company Consolidated $101,386 16.46% $ 49,264 8.00% $ 61,580 10.00%
Bank $ 99,121 16.12% $ 49,194 8.00% $ 61,493 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Company Consolidated $ 93,671 15.21% $ 24,632 4.00% $ 36,948 6.00%
Bank $ 91,417 14.87% $ 24,597 4.00% $ 36,896 6.00%
Tier 1 Capital (to Average Assets):
Company Consolidated $ 93,671 8.80% $ 42,581 4.00% $ 53,226 5.00%
Bank $ 91,417 8.63% $ 42,375 4.00% $ 52,969 5.00%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE BENEFIT PLANS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Nonpension benefits are
accrued over the employees' active service period, defined as the date
of employment up to the date of the employees' eligibility for such
benefits. The Company provides certain health care benefits for retired
employees. The health care plans are contributory for participating
retirees and also requires them to absorb deductibles and coinsurance
with contributions adjusted annually to reflect cost sharing provisions
and benefit limitations. Substantially all of the employees may become
eligible for these benefits if they reach normal retirement age while
working for the Company or its subsidiaries. The benefits are provided
by the participants choice of health maintenance organizations with
community rated premiums or self-insured plans administered by
insurance companies, whose premiums are based on the claims paid during
the year. The Company funds the cost of post retirement health care as
benefits are paid. The Company elected to recognize the transition
obligation in the balance sheets and statements of income on a delayed
basis over the plan participant's future service periods, estimated to
be twenty years.
The Company used a health care trend rate in calculating its
postretirement benefit obligation of 8.5% to 9.5% for 1997, grading
down uniformly to 5.5% for 2005 and thereafter.
Based on the 1996 beginning of the year weighted average discount
rate of 7.50%, the effect of a one-percentage-point increase in the
assumed health care cost trend rates for each future year on the
aggregate of the service and interest cost components of net periodic
postretirement health care benefit cost and the accumulated
postretirement benefit obligation for health care benefits would
increase this amount for 1996 by 20%, to $0.5 million, and by 19%, to
$3.0 million, respectively.
II-37
<PAGE>
The net postretirement health benefits expense and funded status
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Service cost $ 124 $ 90 $ 102
Interest cost 183 183 178
Net amortization and deferral 85 102 105
- -------------------------------------------------------------------------------------------
Net postretirement benefit cost $ 392 $ 375 $ 385
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
December 31, 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
(dollars in thousands)
Fair value of plan assets $ - $ -
- -------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retired participants 1,114 1,185
Fully eligible participants 337 345
Other active participants 1,257 1,220
- -------------------------------------------------------------------------------------------
Total accumulated postretirement benefit
obligation 2,708 2,750
- -------------------------------------------------------------------------------------------
Deficit of plan assets to projected
postretirement benefit obligation (2,708) (2,750)
Unrecognized net actuarial loss 226 147
Unrecognized transition obligation 1,358 1,787
- -------------------------------------------------------------------------------------------
Accrued post retirement benefit cost
included in other liabilities $(1,124) $ (816)
- -------------------------------------------------------------------------------------------
Weighted average discount rate 7.50% 7.50%
- -------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN The Company has a qualified Employee
Stock Ownership Plan for employees who meet certain age and service
requirements under which contributions are made by the Bank to a
separate trust for the benefit of participating employees. Provisions
for contributions to the Plan amounted to $0.6 million in 1996, $0.5
million in 1995, and $0.5 million in 1994.
RETIREMENT SAVINGS PLAN The Company sponsors a savings plan for
employees and matched employee contributions up to 3% for 1996, 2% for
1995, and 1% for 1994. Expenses of $0.2 million, $0.1 million, and $0.1
million were recognized for 1996, 1995 and 1994, respectively.
PENSION PLAN The Company has a qualified, noncontributory pension plan
covering substantially all employees. Benefits paid from the plan are
based on age, years of service, compensation prior to retirement,
social security benefits, and are determined in accordance with defined
formulas. The Company's policy is to fund the pension plan in
accordance with ERISA standards.
II-38
<PAGE>
The net pension expense and the funded status of the plan are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Service cost $ 454 $ 384 $ 609
Interest cost 1,119 843 736
Actual (return) loss on plan assets (2,072) (3,380) 25
Net amortization and deferral 856 2,230 (1,189)
- ----------------------------------------------------------------------------------------------
Net pension expense $ 357 $ 77 $ 181
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
(dollars in thousands)
Plan assets, fair value of
primarily listed stocks and
fixed income securities $15,589 $14,879
- ----------------------------------------------------------------------------------------------
Actuarial present value of benefits for
services rendered to date:
Accumulated benefit obligation,
including vested benefits of $14,605
in 1996 and $10,837 in 1995 14,670 10,898
Additional benefits based on estimated
future salary levels 1,240 1,386
- ----------------------------------------------------------------------------------------------
Projected benefit obligation 15,910 12,284
- ----------------------------------------------------------------------------------------------
Excess (deficit) of plan assets over
projected benefit obligation (321) 2,595
Unrecognized net actuarial gain (2,673) (2,078)
Unamortized prior service cost 4,448 1,151
Unamortized transition asset (1,413) (1,522)
- ----------------------------------------------------------------------------------------------
Prepaid pension expense included
in other assets $ 41 $ 146
- ----------------------------------------------------------------------------------------------
Weighted average discount rate 7.50% 7.50%
Assumed increase in future salary 4.00% 4.00%
Expected rate of return on plan assets 9.00% 9.00%
- ----------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLANS The Company has two stock option plans (Plans). At
December 31, 1996, there were 596,538 shares of the Company's common
stock reserved for issuance under the Plans. Under the terms of the
Plans, options were granted to key employees to purchase shares of the
Company's common stock at a price equal to the fair market value of
the common stock on the date of the grant. Under the Plans, options may
be designated as Incentive Stock Options or as Nonqualified Stock
Options. Options granted terminate eight or ten years from the date of
the grant.
In 1995, the Company granted its then Chairman stock options in
connection with the discharge of severance obligations of the Company
and the Bank under his employment agreement. The agreement issued
options covering 136,437 and 28,593 shares with exercise prices of
$14.69 and $15.33, respectively, and an expiration date of January 31,
1997 (the number of shares under option and the option price per share
have been adjusted for stock dividends). The Company filed a
registration statement relating to these option shares which will be
issued, upon payment of the exercise price, from authorized, but
unissued common stock, or shares held in the treasury. These stock
options do not serve to reduce the number available under the
previously mentioned Plans.
At December 31, 1996, there were 319,554 additional shares
available for grant under the Plans. The per share weighted-average
fair value of stock options granted during 1996 and 1995 was $3.32 and
$2.93, respectively on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions:
1996-expected dividend yield 3.16%, risk-free interest rate of 6.42%,
and an expected life of 7 years; 1995 - expected dividend yield 2.96%,
risk-free interest rate of 5.57%, and an expected life of 7 years.
During 1995, there were also options granted in conjunction with
a severance agreement, as previously discussed, with a per share
weighted-average fair value of $1.45 using the Black Scholes option-
pricing model with the following weighted-average assumptions: 1995-
expected dividend yield 2.96%, risk-free interest rate of 5.15%, and
an expected life of 2 years.
II-39
<PAGE>
The Company applies APB Opinion No. 25 in accounting for its Plans
and, accordingly, no compensation cost has been recognized for its
stock options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $12,179 $9,329
Pro forma 11,801 8,527
Earnings per share As reported $ 1.43 $ 1.06
Pro forma 1.39 0.97
- ------------------------------------------------------------------------
</TABLE>
Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period of 4 years and compensation cost for options
granted prior to January 1, 1995 is not considered.
The following is a summary of changes in options outstanding:
<TABLE>
<CAPTION>
Number Weighted Average of
of Exercise Price of
Options Options Under Plan
- -----------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1994 392,122 $11.47
- -----------------------------------------------------------------------
Granted 273,787 14.82
Exercised (213,155) 10.37
Lapsed (97,513) 14.55
- -----------------------------------------------------------------------
Balance, December 31, 1995 355,241 $13.87
- -----------------------------------------------------------------------
Granted 113,925 15.70
Exercised (17,234) 12.34
Lapsed (10,918) 15.38
- -----------------------------------------------------------------------
Balance, December 31, 1996 441,014 $14.37
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (in years) Price Exercisable Price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 9 - $11 36,465 2.62 $ 9.55 36,465 $ 9.55
$11 - $13 34,404 4.13 11.69 30,162 11.70
$13 - $15 210,923 2.92 14.72 167,090 14.70
$15 - $16 159,223 7.21 15.58 42,207 15.33
- ------------------------------------------------------------------------------------------------------------------
$ 9 - $16 441,015 4.66 $14.37 275,924 $13.79
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
II-40
<PAGE>
<TABLE>
PARENT COMPANY FINANCIAL INFORMATION
<CAPTION>
CONDENSED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
ASSETS
Cash $ 1,799 $ 699
Due from subsidiary bank 20 99
Securities available for sale 352 4,354
Loans 20 20
Investment in subsidiary bank 104,185 105,766
Other assets 36 96
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS $106,412 $111,034
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 148 $ 133
Long-term debt - 2,857
- ------------------------------------------------------------------------------------------------------
Total liabilities 148 2,990
Stockholders' equity 106,264 108,044
- ------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $106,412 $111,034
- ------------------------------------------------------------------------------------------------------
<CAPTION>
CONDENSED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Dividends from subsidiary bank $ 9,700 $ 4,250 $ 5,000
Interest and dividend income 180 343 291
Gain on sale of securities available for sale 3 145 -
- ------------------------------------------------------------------------------------------------------
9,883 4,738 5,291
Interest expense 234 369 447
Operating expense 402 304 617
- ------------------------------------------------------------------------------------------------------
Income before income taxes and equity in
undistributed income of subsidiary bank 9,247 4,065 4,227
Income tax benefit (170) (66) (306)
Equity in undistrubuted income of
subsidiary bank 2,762 5,198 1,975
- ------------------------------------------------------------------------------------------------------
NET INCOME $ 12,179 $ 9,329 $ 6,508
- ------------------------------------------------------------------------------------------------------
</TABLE>
II-41
<PAGE>
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
OPERATING ACTIVITIES:
Net income $ 12,179 $ 9,329 $ 6,508
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of premiums and accretion of
discounts on securities (15) (27) 13
Realized gains on sale of securities
available for sale (3) (145) -
(Increase) decrease in other assets 62 23 (6)
Increase (decrease) in other liabilities 15 (28) (8)
Undistributed net income of subsidiary bank (2,762) (5,198) (1,975)
Other, net 8 25 1
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,484 3,979 4,533
- ------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities - - 1,000
Proceeds from sales of securities 4,979 7,953 -
Purchases (977) (5,158) (1,001)
Other, net - 34 (49)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 4,002 2,829 (50)
- ------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Repayment of long-term debt (2,857) (714) (714)
Common stock issued, including treasury shares
reissued 2,030 4,362 2,893
Purchase of treasury stock (7,241) (7,075) (3,555)
Cash dividends and payment for fractional shares (4,397) (3,974) (3,605)
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (12,465) (7,401) (4,981)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 1,021 (593) (498)
Cash and cash equivalents at beginning of year 798 1,391 1,889
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,819 $ 798 $ 1,391
- ------------------------------------------------------------------------------------------------------------
</TABLE>
FAIR VALUES OF FINANCIAL INSTRUMENTS A financial instrument is defined as
cash, evidence of an ownership interest in an entity, or a contract that
imposes the obligation to deliver, receive, or exchange cash or other
financial instruments between willing entities on potentially favorable or
unfavorable terms. There are no off balance sheet derivative financial
instruments at December 31, 1996 and 1995. The following methods and
assumptions were used to estimate the fair value of each class of
financial instruments.
CASH AND DUE FROM BANKS AND FEDERAL FUNDS SOLD For these short-term
instruments, carrying value approximates fair value.
SECURITIES Fair values for securities are based on quoted market
prices or dealer quotes, where available. Where quoted market prices
are not available, fair values are based on quoted market prices of
comparable instruments.
LOANS For variable rate loans that reprice frequently and have no
significant credit risk, fair values are based on carrying values. The
fair values for fixed rate loans are estimated through discounted cash
flow analyses using interest rates currently being offered for loans
with similar terms and credit quality. The fair value of loans
available for sale on an aggregate basis, are based on quoted market
prices. Nonperforming loans are valued based upon recent loss history
for similar loans.
ACCRUED INTEREST RECEIVABLE AND PAYABLE For these short-term
instruments, carrying value approximates fair value.
II-42
<PAGE>
DEPOSITS The fair values disclosed for savings, money market, and
noninterest bearing accounts are, by definition, equal to their
carrying values at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using a discounted cash flow
analysis that applies interest rates currently offered on certificates
to a schedule of aggregated expected monthly maturities on time
deposits.
SHORT-TERM BORROWINGS For short-term borrowings, carrying value
approximates fair value.
OTHER BORROWINGS The fair value of other borrowings has been estimated
using discounted cash flow analyses that apply interest rates currently
being offered for notes with similar terms.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair
value of commitments to extend credit and standby letters of credit are
estimated using fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the present credit worthiness of the counterparts. Carrying amounts
which are comprised of the unamortized fee income are immaterial.
<PAGE>
<TABLE>
ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1996 1995
- ---------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks $ 35,790 $ 35,790 $ 44,379 $ 44,379
Loans available for sale 4,135 4,135 6,089 6,089
Securities available for sale 369,202 369,202 393,536 393,536
Securities held to maturity 42,239 42,238 40,311 40,306
Loans:
Commercial and agricultural 281,991 280,342 247,320 247,136
Real estate mortgage 119,870 120,346 120,972 121,257
Consumer 252,732 255,108 220,093 221,884
- ---------------------------------------------------------------------------------------------------------
Total loans 654,593 655,796 588,385 590,277
Less allowance for loan losses 10,473 - 9,120 -
- ---------------------------------------------------------------------------------------------------------
Net loans 644,120 655,796 579,265 590,277
Accrued interest receivable 7,919 7,919 8,967 8,967
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
<S>
FINANCIAL LIABILITIES
Deposits:
Interest bearing:
Savings and money market 359,141 359,141 352,221 352,221
Certificates of deposit 435,063 442,933 389,584 397,845
Noninterest bearing 122,115 122,115 131,227 131,227
- ---------------------------------------------------------------------------------------------------------
Total deposits 916,319 924,189 873,032 881,293
Short-term borrowings 88,244 88,244 115,945 115,945
Other borrowings 20,195 20,185 3,012 3,325
Accrued interest payable $ 2,431 $ 2,431 $ 2,430 $ 2,430
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
II-43
<PAGE>
DESCRIPTION OF EXHIBITS
Certificate of Incorporation of NBT BANCORP INC., as Amended through
April 22, 1995.
By-laws of NBT BANCORP INC., as amended and restated through November
15, 1995.
NBT BANCORP INC. Employee Stock Ownership Plan Amended and restated as
of January 1, 1989, including amendments adopted through December 31,
1994.
NBT BANCORP INC. Employee Stock Ownership Plan Amendment #1 dated
November 13, 1995.
NBT BANCORP INC. Defined Benefit Pension Plan Amended and restated as
of October 1, 1989, including Amendments adopted through December 31,
1994.
Amendment #1 dated February 21, 1995 to NBT BANCORP INC. Defined
Benefit Pension Plan Amended and restated as of October 1, 1989,
including Amendments adopted through December 31, 1994.
Amendment #2 dated May 23, 1995 to NBT BANCORP INC. Defined Benefit
Pension Plan Amended and restated as of October 1, 1989, including
Amendments adopted through December 31, 1994.
NBT BANCORP INC. Defined Benefit Pension Plan Amendment #3 dated
November 13, 1995.
NBT BANCORP INC. Defined Benefit Pension Plan Amendment #4 dated
January 22, 1996.
NBT Bancorp 401(k) Retirement Plan Adoption Agreement.
Amendment dated November 11, 1994 to the Scudder prototype 401(k) Plan
adopted as the NBT Bancorp Inc. 401(k) Retirement Plan.
Amendment dated November 15, 1994 to the 401(k) Plan Adoption Agreement
for the NBT Bancorp Inc. 401(k) Retirement Plan.
Amendment #1 dated February 21, 1995 to the NBT Bancorp Inc. 401(k)
Retirement Plan.
NBT BANCORP INC. 401(k) Plan Adoption Agreement Amendment dated
November 13, 1995.
NBT BANCORP INC. Stock Option Plan dated November 26, 1986, as amended
through February 16, 1993.
Amendment dated April 24, 1993 to the NBT BANCORP INC. Stock Option
Plan dated November 26, 1986, as amended through February 16, 1993.
NBT BANCORP INC. 1993 Stock Option Plan.
NBT BANCORP INC. 1997 Executive Incentive Compensation Plan.
Lease of Binghamton Office.
Lease and Lease Extension of Vail Mills Office.
Lease extension of Vail Mills Office.
Lease of Plattsburgh North Office.
Lease of Rome Office.
Lease and Lease Extensions of South Otselic Office.
Lease of Utica Business Park Office.
Lease of Utica Downtown Office.
Change in control agreement with Daryl R. Forsythe.
Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank,
National Association and Daryl R. Forsythe made as of January 1, 1995.
Death Benefits Agreement between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe made August 22, 1995.
Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe made as of August 1, 1995.
NBT Bancorp Inc. and Subsidiaries Master Deferred Compensation Plan of
Directors, adopted February 11, 1992.
Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, National
Association and (Key Management Group) made as of January 2, 1997.
Restricted Stock Agreement between NBT Bancorp Inc. and (Director) made
January 1, 1997.
Restricted Stock Agreement between NBT Bank, National Association and
(Director) made January 1, 1997.
Restricted Stock Agreement between NBT Bank, National Association and
Daryl R. Forsythe made January 1, 1997.
A list of the subsidiaries of the registrant.
Consent of KPMG Peat Marwick LLP.
Financial Data Schedule.
COPIES OF EXHIBITS ARE AVAILABLE UPON PAYMENT OF REPRODUCTION COSTS.
SUBMIT YOUR WRITTEN REQUEST TO JOE C. MINOR, SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER OF NBT BANCORP INC.
II-44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on
FORM 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this eleventh day of March, 1997.
NBT BANCORP INC.
(Registrant)
By:
/s/ DARYL R. FORSYTHE
Daryl R. Forsythe, President
and Chief Executive Officer
/s/ JOE C. MINOR
Joe C. Minor, Vice President
Treasurer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant in the capacities and on the date indicated.
/s/ DARYL R. FORSYTHE March 11, 1997
- --------------------------- --------------
Daryl R. Forsythe, Director DATE
/s/ EVERETT A. GILMOUR March 11, 1997
- ---------------------------- --------------
Everett A. Gilmour, Director DATE
/s/ PETER B. GREGORY March 11, 1997
- -------------------------- --------------
Peter B. Gregory, Director DATE
/s/ ANDREW S. KOWALCZYK March 11, 1997
- ----------------------------- --------------
Andrew S. Kowalczyk, Director DATE
/s/ JOHN C. MITCHELL March 11, 1997
- -------------------------- --------------
John C. Mitchell, Director DATE
/s/ PAUL O. STILLMAN March 11, 1997
- -------------------------- --------------
Paul O. Stillman, Director DATE
II-45
<PAGE>
EXHIBIT INDEX
The following documents are attached as Exhibits to this FORM 10-K or,
if annotated by the symbol *, are incorporated by reference as Exhibits
as indicated by the page number or exhibit cross-reference to the prior
filings of the Registrant with the Commission.
<TABLE>
<CAPTION>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
<S> <C> <C>
3.1 Certificate of Incorporation of NBT BANCORP INC., as *
Amended through April 22, 1995.
FORM 10-Q for the quarterly period ended June 30,
1995, filed August 14, 1995 -- Exhibit 3.1.
3.2 By-laws of NBT BANCORP INC., as amended and restated *
through November 15, 1995.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 3.3.
10.1 NBT BANCORP INC. Employee Stock Ownership Plan Amended *
and restated as of January 1, 1989, including amendments
adopted through December 31, 1994.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.1.
10.2 NBT BANCORP INC. Employee Stock Ownership Plan *
Amendment #1 dated November 13, 1995.
FORM 10-K for the year ended December 31, 1995, filed
March 25, 1996 -- Exhibit 10.2.
10.3 NBT BANCORP INC. Defined Benefit Pension Plan Amended and *
restated as of October 1, 1989, including Amendments
adopted through December 31, 1994.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.2.
10.4 Amendment #1 dated February 21, 1995 to NBT BANCORP INC. *
Defined Benefit Pension Plan Amended and restated as of
October 1, 1989, including Amendments adopted through
December 31, 1994.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 7, 1995 -- Exhibit 10.1.
10.5 Amendment #2 dated May 23, 1995 to NBT BANCORP INC. *
Defined Benefit Pension Plan Amended and restated as of
October 1, 1989, including Amendments adopted through
December 31, 1994.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.2.
10.6 NBT BANCORP INC. Defined Benefit Pension Plan Amendment *
#3 dated November 13, 1995.
FORM 10-K for the year ended December 31, 1995, filed
March 25, 1996 --Exhibit 10.6.
10.7 NBT BANCORP INC. Defined Benefit Pension Plan Amendment *
#4 dated January 22, 1996.
FORM 10-K for the year ended December 31, 1995, filed
March 25, 1996 -- Exhibit 10.7.
10.8 NBT Bancorp 401(k) Retirement Plan Adoption Agreement. *
FORM 10-Q for the quarterly period ended September 30,
1994 -- Exhibit 10.2.
10.9 Amendment dated November 11, 1994 to the Scudder prototype *
401(k) Plan adopted as the NBT Bancorp Inc. 401(k)
Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.3.
</TABLE>
II-46
<PAGE>
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
<S> <C> <C>
10.10 Amendment dated November 15, 1994 to the 401(k) Plan *
Adoption Agreement for the NBT Bancorp Inc. 401(k)
Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.4.
10.11 Amendment #1 dated February 21, 1995 to the NBT Bancorp *
Inc. 401(k) Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.5.
10.12 NBT BANCORP INC. 401(k) Plan Adoption Agreement *
Amendment dated November 13, 1995.
FORM 10-K for the year end December 31, 1995, filed
March 25, 1996 -- Exhibit 10.12.
10.13 NBT BANCORP INC. Stock Option Plan dated November 26, *
1986, as amended through February 16, 1993.
FORM 10-K for the year ended December 31, 1992, filed
March 31, 1993 -- Exhibit 10.17.
10.14 Amendment dated April 24, 1993 to the NBT BANCORP INC. *
Stock Option Plan dated November 26, 1986, as amended
through February 16, 1993.
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A NBT BANCORP INC. 1993 Stock Option
Plan, Paragraph 22.
10.15 NBT BANCORP INC. 1993 Stock Option Plan. *
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A.
10.16 NBT BANCORP INC. 1997 Executive Incentive Compensation Herein
Plan.
Document is attached as Exhibit 10.16.
10.17 Lease of Binghamton Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.21.
10.20 Lease and Lease Extension of Vail Mills Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.23.
10.21 Lease extension of Vail Mills Office. *
FORM 10-Q for the quarterly period ended September 30,
1996, filed November 14, 1996 -- Exhibit 10.1.
10.22 Lease of Plattsburgh North Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.24.
10.23 Lease of Rome Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.25.
10.24 Lease and Lease Extensions of South Otselic Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.26.
10.25 Lease of Utica Business Park Office. *
FORM 10-Q for the quarterly period ended September 30,
1994, filed November 14, 1994 -- Exhibit 10.01.
10.26 Lease of Utica Downtown Office. *
FORM 10-K for the year ended December 31, 1995, filed
March 25, 1996 -- Exhibit 10.26.
</TABLE>
II-47
<PAGE>
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
<S> <C> <C>
10.27 Change in control agreement with Daryl R. Forsythe. *
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.21.
10.28 Supplemental Retirement Agreement between NBT Bancorp *
Inc., NBT Bank, National Association and Daryl R.
Forsythe made as of January 1, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.1.
10.29 Death Benefits Agreement between NBT Bancorp Inc., NBT *
Bank, National Association and Daryl R. Forsythe made
August 22, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.2.
10.30 Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, *
National Association and Daryl R. Forsythe made as of
August 1, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.4.
10.31 NBT Bancorp Inc. and Subsidiaries Master Deferred *
Compensation Plan of Directors, adopted February 11,
1992.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.3.
10.40 Wage Continuation Plan between NBT Bancorp Inc., NBT Herein
Bank, National Association and (Key Management Group)
made as of January 2, 1997.
Document is attached as Exhibit 10.40.
Substantially identical contracts for the following have
been omitted: John R. Bradley, Senior Vice President,
Commercial Banking Division Head; Martin A. Dietrich,
Senior Vice President, Retail Division Head; Joe C. Minor,
Senior Vice President, Chief Financial Officer and
Treasurer; and John D. Roberts, Senior Vice President,
Trust Division Head.
10.45 Restricted Stock Agreement between NBT Bancorp Inc. and Herein
(Director) made January 1, 1997.
Document is attached as 10.45.
Substantially identical contracts for the following
directors have been omitted: Andrew S. Kowalczyk, Jr.;
Paul O. Stillman; John C. Mitchell; Evertt A. Gilmour
and Peter B. Gregory.
10.50 Restricted Stock Agreement between NBT Bank, National Herein
Association and (Director) made January 1, 1997.
Document is attached as 10.50.
Substantially identical contracts for the following
directors have been omitted: Dan B. Marshman; Kenneth
M. Axtell; J. Peter Chaplin; Andrew S. Kowalxzyk, Jr.;
Paul O. Stillman; William L. Owens; C. Vernon Stratton;
John C. Mitchell; Janet H. Ingraham; Everett A. Gilmour;
Richard F. Monroe and Peter B. Gregory.
10.55 Restricted Stock Agreement between NBT Bank, National Herein
Association and Daryl R. Forsythe made January 1, 1997.
Document is attached as 10.55.
21 A list of the subsidiaries of the registrant is attached Herein
as Exhibit 21.
23 Consent of KPMG Peat Marwick LLP. Herein
Document is attached as Exhibit 23.
27 Financial Data Schedule. Herein
Document is attached as Exhibit 27.
</TABLE>
II-48
<PAGE>
EXHIBIT 10.16
NBT BANCORP INC. 1997 Executive Incentive Compensation Plan
<PAGE>
January 28, 1997
NBT BANCORP INC.
Norwich, New York
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE>
NBT BANCORP INC.
Norwich, New York
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
------------------------------------------
Table of Contents
Page
Introduction 1-2
Incentive Plan
Section I - Definitions 3
Section II - Participation 4
Section III - Activating the Plan 4
Section IV - Calculation of Awards 4
Section V - President's Special Recommendations 4
Section VI - Distribution of Awards 5
Section VII - Plan Administration 6
Section VIII - Amendment, Modification, Suspension or Termination 6
Section IX - Effective Date 6
Section X - Employer Relations with Participants 6
Section XI - Governing Law 6
Incentive Plan Participants Appendix A
Distribution of Awards Appendix B
<PAGE>
NBT BANCORP INC.
NORWICH, NEW YORK
Introduction
------------
It is important to examine the benefits which accrue to the organization
through the operation of the Executive Incentive Compensation Plan. The Plan
impacts directly on senior and middle management - those critical to the
organization's success - and its purpose can be summarized as follows:
* PROVIDES MOTIVATION: The opportunity for incentive awards provides
executives with the impetus to "stretch" for challenging, yet
attainable, goals.
* PROVIDES RETENTION: by enhancing the organization's competitive
compensation posture.
* PROVIDES MANAGEMENT TEAM BUILDING: by making the incentive award
dependent on the attainment of organization goals, a "team orientation"
is fostered among the participant group.
* PROVIDES INDIVIDUAL MOTIVATION: by making a portion of the incentive
award dependent on the attainment of individual goals, a participant is
encouraged to make significant personal contribution to the corporate
effort.
* PROVIDES COMPETITIVE COMPENSATION STRATEGY: The implementation of
incentive arrangements is competitive with current practice in the
banking industry.
-1-
<PAGE>
Highlights of the 1997 Executive Incentive Compensation Plan included in the
following pages are as follows:
1. The Plan is competitive compared with similar sized banking
organizations and the banking industry in general.
2. The Compensation Committee of the Board of Directors controls all
aspects of the Plan.
3. Management employees are eligible for participation.
4. The financial criteria necessary for Plan operation consist of Return
on Average Assets (25% Weight) and Return of Equity (50% Weight) and
Profit Improvement (25% Weight).
5. Incentive distributions will be made during the first quarter of the
year following the Plan Year.
6. Incentive awards will be based on attainment of corporate goals. Total
Incentive Awards contain both Corporate and Individual components; the
corporate component awarded by virtue of corporate performance related
to corporate goals and the individual component awarded by virtue of
individual performance related to individual goals. Component
percentages are shown in Appendix B.
7. Incentive distributions will be based on matrix in Appendix B.
-2-
<PAGE>
NBT BANCORP INC.
Norwich, New York
The Board of Directors of NBT Bancorp Inc. has established this 1997
Executive Incentive Compensation Plan. The purpose of the Plan is to meet and
exceed financial goals and to promote a superior level of performance
relative to the bank's competition in its market area. Through payment of
incentive compensation beyond base salaries, the Plan provides reward for
meeting and exceeding the bank's financial goals.
SECTION I - DEFINITIONS
-----------
Various terms used in the Plan are defined as follows:
BASE SALARY: the base salary at the end of the Plan year, excluding
any bonuses, contributions to employee benefit programs, or other
compensation not designated as salary.
BOARD OF DIRECTORS: The Board of Directors of NBT Bancorp Inc.
PRESIDENT & CEO: President and CEO of NBT Bancorp Inc.
CORPORATE GOALS: Those pre-set objectives and goals which are required
to activate distribution of awards under the Plan.
INDIVIDUAL GOALS: Key objectives mutually agreed upon between
participants and superior, and approved by the CEO.
COMPENSATION COMMITTEE: The Compensation Committee of the Board of
Directors of the Bank.
PLAN PARTICIPANT: An eligible employee of the bank designated by the
President & CEO and approved by the Compensation Committee for
participation for the Plan Year.
PLAN YEAR: The 1997 calendar year.
-3-
<PAGE>
SECTION II - ELIGIBILITY TO PARTICIPATE
--------------------------
To be eligible for an award under the Plan, a Plan participant must be an
officer in the full-time service of the bank at the start and close of the
calendar year and at the time of the award unless the CEO by special
exception recommends to the Compensation Committee a special arrangement for
a newly hired executive who may be designated by the CEO and approved by the
Compensation Committee as eligible for an award as determined in the
employment agreement. A Plan participant must be in the same or equivalent
position, at year end as they were when named a participant or have been
promoted during the course of the year, to be eligible for an award. If a
Plan participant voluntarily leaves the employ of the bank prior to the
payment of the award, he/she is not eligible to receive an award. However,
if the active full-time service of a participant in the Plan is terminated
by death, disability, retirement, or if the participant is on an approved
leave of absence, the President should recommend an award to such a
participant based on the proportion of the Plan year that he/she was in
active service with the bank.
SECTION III - ACTIVATING THE PLAN
-------------------
The operation of the Plan is predicated on attaining and exceeding
management performance goals. The goals will consist of return on average
assets, return on shareholder's equity and profit improvement. The
Corporation must achieve a minimum net income set forth in Appendix B to
trigger an award pursuant to the terms of this plan.
SECTION IV - CALCULATION OF AWARDS
---------------------
The Compensation Committee designates the incentive formula as shown in
Appendix B. The actual rate of distribution is based upon Company
performance. The Compensation Committee will make final decisions with
respect to all incentive awards and will have final approval over all
incentive awards. The individual participant data regarding maximum award
and formulas used in calculation has been customized and appears as
Appendex A.
SECTION V - PRESIDENT'S SPECIAL RECOMMENDATIONS
-----------------------------------
The President & CEO will recommend to the Compensation Committee the amounts
to be awarded to individual participants in the incentive Plan. The
President & CEO may recommend a change beyond the formula to a bonus award
(increase or decrease) to an individual participant by a specified percentage
based on assessment of special individual performance beyond the individual
goals. The Compensation Committee may amend the President & CEO's bonus
award. The amount of the adjustment is from 0%-20% of the actual award. No
award will be granted to an officer whose performance is unacceptable.
-4-
<PAGE>
SECTION VI - DISTRIBUTION OF AWARDS
----------------------
Unless a participant elects the deferred option outlined in the following
paragraph, distribution of awards will be made during the first quarter of
the year following the Plan year. Distribution of the bonus award must be
approved by the Compensation Committee.
A participant may elect by written notice to the Committee at any time during
the month of December of the Plan Year preceding the year to which the award
relates to have all or a portion of his award deferred (Deferred Award). Any
such election shall be irrevocable except unforeseeable financial emergency.
Any portion of participant's award that is deferred shall bear interest
commencing on the Award Date based on the lowest balance in the participant's
account during the month, as if invested at an annual rate equal to the
highest annual rate offered at NBT on any customer deposit account in effect
on the last day of the preceding calendar year. Interest shall be computed
monthly, and credited to the participant's account as of the last day of each
calendar month.
The Deferred Award shall be paid in five (5) annual installments upon the
participant's ceasing to be actively employed by the Company for any reason.
Payment shall begin on the 31st day of January following the year in which
the participant ceases to be actively employed with the Company. However, a
participant with the consent of the Committee, prior to termination of
employment, may elect in writing to have the aggregate amount in his or her
Deferred Award Account paid to him or her in a lump sum on a designated date.
Nothing contained in this Plan and no action taken pursuant to the provisions
of this Plan shall create or be constructed to create a trust of any kind, or
a fiduciary relationship between NBT and the participant, his or her
designated beneficiary or any other person, nor shall the participant or any
designated beneficiary have any preferred claim on, any title to, or any
beneficial interest in, the assets of NBT or the payments deferred hereunder
prior to the time such payments are actually paid to the participant pursuant
to the terms herein. To the extent that the participant, his or her
designated beneficiary or any person acquires a right to receive payments
from NBT under this Plan, such right shall be no greater than the right of
any unsecured general creditor of NBT.
The intent of this Section of the Plan is to create a voluntary,
non-qualified, unfunded, deferred executive incentive compensation Plan which
will defer the deduction of such incentive compensation for tax purposes by
NBT and which will correspondingly defer the recognition of such compensation
by the participant until such compensation is actually paid. It is therefore
intended, and this Plan shall be construed and where necessary modified, so
that the participants shall not be deemed to have constructively received
such deferred compensation.
In the event of death, any approved award earned under the provisions of this
plan will become payable to the beneficiary designated under this Plan; or if
no such designation, to the designated beneficiary of the participant as
recorded under the bank's group life insurance program; or in the absence of
a valid designation, to the participant's estate.
-5-
<PAGE>
SECTION VII - PLAN ADMINISTRATION
-------------------
The Compensation Committee shall, with respect to the Plan have full power
and authority to construe, interpret and manage, control and administer this
Plan, and to pass and decide upon cases in conformity with the objectives of
the Plan under such rules as the Board of Directors of the bank may establish.
Any decision made or action taken by the Bank, the Board of Directors, or the
Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of the Plan shall be at their
absolute discretion and will be conclusive and binding on all parties. No
member of the Board of Directors, Compensation Committee, or employee of the
bank shall be liable for any act or action hereunder, whether of omission or
commission, by a Plan participant or employee or by any agent to whom duties
in connection with the administration of the Plan have been delegated in
accordance with the provision of the Plan.
SECTION VIII - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
--------------------------------------------------
The bank reserves the right, by and through its Board of Directors to amend,
modify, suspend, reinstate or terminate all or part of the Plan at any time.
The Compensation Committee will give prompt written notice to each
participant of any amendment, suspension or termination or any material
modification of the Plan. In the event of a merger or acquisition, the Plan
and related financial formulas will be reviewed and, if necessary, revised
to take into account the financial status of any merged institution.
SECTION IX - EFFECTIVE DATE OF THE PLAN
--------------------------
The effective date of the Plan shall be January 1, 1997.
SECTION X - EMPLOYER RELATION WITH PARTICIPANTS
-----------------------------------
Neither establishment nor the maintenance of the Plan shall be construed as
conferring any legal rights upon any participant or any person for a
continuation of employment, nor shall it interfere with the right of an
employer to discharge any participant or otherwise deal with him/her without
regard to the existence of the Plan.
SECTION XI - GOVERNING LAW
-------------
Except to the extent pre-empted under federal law, the provisions of the Plan
shall be construed, administered and enforced in accordance with the domestic
internal law of the State of New York. In the event of relevant changes in
the Internal Revenue Code, related rulings and regulations, changes imposed
by other regulatory agencies affecting the continued appropriateness of the
Plan and awards made thereunder, the Board may, at its sole discretion,
accelerate or change the manner of payments of any unpaid awards or amend the
provisions of the Plan.
-6-
<PAGE>
DEFERRED COMPENSATION PLAN
FOR OFFICERS OF NBT BANCORP & SUBSIDIARIES
ELECTION AGREEMENT
I, ____________________, hereby elect [ ] to [ ] not to participate in the
Deferred Compensation Plan for officers of NBT with respect to Executive
Incentive Compensation (EICP) awards which I may receive for the calendar
year of __________. I hereby elect to defer the payment of __________
(__________%) of the EICP award which I would otherwise be entitled to
receive.
[ ] Please defer payment of the percentage of my EICP award specified
above until the earlier of the following dates:
[ ] Until ____________________ (Specify date which may not be later
than the date on which I will retire).
[ ] Until the date of my death.
[ ] Begin annual payments of deferred balance on ____________________
in the amount of 1/5th the balance each year until the balance has
been paid in full (5 year payout).
[ ] Because terms of the plan have changed since my election to defer
EICP awards, please discontinue my deferral election and:
[ ] Roll my deferred account proceeds into the following account at the
institution indicated:
___________________________________________________________________
___________________________________________________________________
[ ] Please pay me out in cash, the balance of my account, at this time.
[ ] I hereby designate the following person or persons as beneficiary
hereunder in the event of my death:
Primary Beneficiary ____________________________________________________
Secondary Beneficiary __________________________________________________
I hereby revoke any prior election that may be inconsistent with the above.
I acknowledge that I have reviewed the plan and understand that my
participation will be subject to the terms and conditions contained in the
plan. Words and phrases used in this Election Agreement shall have the
meanings assigned by the plan.
Dated this _____ day of _____, 199_.
___________________________________
<PAGE>
EXHIBIT 10.40
Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, National
Association and (Key Management Group)
<PAGE>
January 2, 1997
Dear Mr. :
NBT Bancorp Inc. (which, together with its wholly-owned subsidiary, NBT
Bank, National Association, is referred to as the "Company") considers the
stability of its key management group to be essential to the best interests
of the Company and its shareholders. The Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a change in
control may arise and that the attendant uncertainty may result in the
departure or distraction of key management personnel to the detriment of the
Company and its shareholders.
Accordingly, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to encourage members of the
Company's key management group to continue as employees notwithstanding the
possibility of a change in control of the Company.
The Board also believes it important that, in the event of a proposal
for transfer of control of the Company, you be able to assess the proposal
and advise the Board without being influenced by the uncertainties of your
own situation.
In order to induce you to remain in the employ of the Company, this
Agreement, which has been approved by the Board, sets forth the severance
compensation which the Company agrees will be provided to you in the event
your employment with the Company is terminated subsequent to a "change in
control" of the Company under the circumstances described below.
1. AGREEMENT TO PROVIDE SERVICES; RIGHT TO TERMINATE.
(a) TERMINATION PRIOR TO CERTAIN OFFERS. Except as otherwise provided
in paragraph (b) below, or in any written employment agreement between you
and the Company, the Company or you may terminate your employment at any
time. If, and only if, such termination occurs after a change in control of
the Company (as defined in Section 6), the provisions of this Agreement
regarding payment of severance compensation and benefits shall apply.
<PAGE>
(B) TERMINATION SUBSEQUENT TO CERTAIN OFFERS. In the event a tender
offer or exchange offer is made by a person (as defined in Section 6) for
more than 30 percent of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors ("Voting Securities"), including shares of common stock, no par
value, of the Company (the "Company Shares"), you agree that you will not
leave the employ of the Company (other than as a result of Disability as
such term is defined in Section 6) and will render services to the Company
in the capacity in which you then serve until such tender offer or exchange
offer has been abandoned or terminated or a change in control of the Company
has occurred as a result of such tender offer or exchange offer. If, during
the period you are obligated to continue in the employ of the Company
pursuant to this Section 1 (b), the Company reduces your compensation, your
obligations under this Section 1(b) shall thereupon terminate.
2. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect until December 31, 1998, provided,
however, that commencing December 31, 1997 and each December 31 thereafter,
the remaining term of this Agreement shall automatically be extended for one
additional year (to a total of two years) unless at least 90 days prior to
such December 31, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a change in
control of the Company shall occur while this Agreement is in effect, this
Agreement shall automatically be extended for 24 months from the date the
change in control occurs. This Agreement shall terminate if you or the
Company terminates your employment prior to a change in control of the
Company but without prejudice to any remedy the Company may have for breach
of your obligations, if any, under Section 1(b).
3. SEVERANCE PAYMENT AND BENEFITS IF TERMINATION OCCURS FOLLOWING
CHANGE IN CONTROL FOR DISABILITY, WITHOUT CAUSE, OR WITH GOOD REASON. If,
within 24 months from the date of occurrence of any event constituting a
change in control of the Company (it being recognized that more than one
such event may occur in which case the 24-month period shall run from the
date of occurrence of each such event), your employment with the Company is
terminated (i) by the Company for Disability, (ii) by the Company without
Cause, or (iii) by you with Good Reason (as defined in Section 6), you shall
be entitled to a severance payment and other benefits as follows:
(a) DISABILITY. If your employment with the Company is terminated for
Disability, your benefits shall thereafter be determined in accordance with
the Company's long-term disability income insurance plan. If the Company's
long-term disability income insurance plan is modified or terminated
following a change in control, the Company shall substitute such a plan with
benefits applicable to you substantially similar to those provided by such
plan prior to its modification or termination. During any period that you
fail to perform your duties hereunder as a result of incapacity due to
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physical or mental illness, you shall continue to receive your full base
salary at the rate then in effect until your employment is terminated by the
Company for Disability.
(b) TERMINATION WITHOUT CAUSE OR WITH GOOD REASON. If your employment
with the Company is terminated without Cause by the Company or with Good
Reason by you, then the Company shall pay to you, upon demand, the following
amounts (net of applicable payroll taxes):
(i) Your full base salary plus year-to-date accrued vacation
through the Date of Termination at the rate in effect on the date the change
in control occurs.
(ii) As severance pay, an amount equal to the product of your
"Base Amount" multiplied by the number 2. As used in the previous sentence,
your "Base Amount" is your average annual compensation includible in your
gross income for federal income tax purposes for the five years
immediately preceding the year in which the change in control occurs (or, if
you shall have been employed by the Company for less than those five years,
for the number of those years during which you shall have been employed by
the Company, with any partial year annualized), including base salary,
non-deferred amounts under annual incentive, long-term performance, and
profit-sharing plans, distributions of previously deferred amounts under such
plans, and ordinary income recognized with respect to stock options.
(c) RELATED BENEFITS. Unless you die or your employment is terminated
by the Company for Cause or Disability, or by you other than for Good Reason,
the Company shall maintain in full force and effect, for the continued
benefit of you for one year after the Date of Termination, all noncash
employee benefit plans, programs, or arrangements (including, without
limitation, pension and retirement plans and arrangements, stock option
plans, life insurance and health and accident plans and arrangements,
medical insurance plans, disability plans, and vacation plans) in which you
were entitled to participate immediately prior to the Date of Termination
provided that your continued participation is possible after Termination
under the general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to participate
in a benefit plan, program, or arrangement of another employer which confers
substantially similar benefits upon you, you shall cease to receive benefits
under this subsection in respect of such plan, program, or arrangement. In
the event that your participation in any such plan, program, or arrangement
is barred, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive under such
plans, programs and arrangements.
4. PAYMENT IF TERMINATION OCCURS FOLLOWING CHANGE IN CONTROL, BECAUSE OF
DEATH, FOR CAUSE, OR WITHOUT GOOD REASON. If your employment shall be
terminated following any event constituting a change in control of the
Company because of your death, or by the Company for Cause, or
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<PAGE>
by you other than for Good Reason, the Company shall pay you your full base
salary plus year-to-date accrued vacation through the Date of Termination at
the rate in effect on the date of the change in control occurs. The Company
shall have no further obligations to you under this Agreement.
5. NO MITIGATION. You shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor, except as expressly set forth herein, shall the amount of
any payment provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer after the Date
of Termination, or otherwise.
6. DEFINITIONS OF CERTAIN TERMS. For the purpose of this Agreement,
the terms defined in this Section 6 shall have the meanings assigned to them
herein.
(a) CAUSE. Termination of your employment by the Company for "Cause"
shall mean termination because, and only because, you committed an act of
fraud, embezzlement, or theft constituting a felony or an act of
intentionally against the interests of the Company which causes the Company
material injury. Notwithstanding the foregoing, you shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose (after reasonable notice
to you and and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the Board
you were guilty of conduct constituting Cause as defined above and specifying
the particulars thereof in detail.
(b) CHANGE IN CONTROL. A "Change in Control" of the Company shall
mean:
(i) A change in control of a nature that would be required to be
reported in response to Item 6 (e) of Schedule 14A of Regulation 14A as in
effect on the date hereof pursuant to the Securities Exchange Act of 1934
(the "Exchange Act'); provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as any Person hereafter
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 30 percent or more of the combined voting
power of the Company's Voting Securities; or
(ii) During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved
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by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which Voting Securities would be converted into
cash, securities, or other property, other than a merger of the Company in
which the holders of Voting Securities immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all of the assets of the Company, provided that any such
consolidation, merger, sale, lease, exchange or other transfer consummated
at the insistence of an appropriate banking regulatory agency shall not
constitute a change in control; or
(iv) Approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
(c) DATE OF TERMINATION. "Date of Termination" shall mean (i) if your
employment is terminated by the Company for Disability, 30 days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period),
and (ii) if your employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided that if within 30 days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties or
by a final judgment, order, or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected). The term of this Agreement shall be extended until the Date of
Termination.
(d) DISABILITY. Termination of your employment by the Company for
"Disability" shall mean termination because of your absence from your duties
with the Company on a full-time basis for 180 consecutive days as a result of
your incapacity due to physical or mental illness and your failure to return
to the performance of your duties on a full-time basis during the 30-day
period after Notice of Termination is given.
(e) GOOD REASON. Termination by you of your employment for "Good
Reason" shall mean termination based on any of the following:
(i) A change in your status or position(s) with the Company,
which in your reasonable judgment, does not represent a promotion from your
status or position(s) as in effect immediately prior to the change in
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control, or a change in your duties or responsibilities which, in your
reasonable judgment, is inconsistent with such status or position(s), or any
removal of you from, or any failure to reappoint or reelect you to, such
position(s), except in connection with the termination of your employment for
Cause or Disability or as a result of your death or by you other than for
Good Reason.
(ii) A reduction by the Company in your base salary as in effect
immediately prior to the change in control.
(iii) The failure by the Company to continue in effect any Plan
(as hereinafter defined) in which you are participating at the time of the
change in control of the Company (or Plans providing you with at least
substantially similar benefits) other than as a result of the normal
expiration of any such Plan in accordance with its terms as in effect at
the time of the change in control, or the taking of any action, or the
failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you
as is the case on the date of the change in control or which would materially
reduce your benefits in the future under any of such Plans or deprive you of
any material benefit enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit you with
the number of paid vacation days to which you are then entitled in accordance
with the Company's normal vacation policy as in effect immediately prior to
the change of control.
(v) The Company's requiring you to be based anywhere other than
where your office is located immediately prior to the change in control
except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control.
(vi) The failure by the Company to obtain from any successor the
assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement; and for purposes of this Agreement, no such
purported termination shall be effective.
(viii)Any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which, prior to the change in control, you were
permitted by the Board to attend to or engage in.
6
<PAGE>
For purposes of this subsection, "Plan" shall mean any compensation plan such
as an incentive or stock option plan or any employee benefit such as a
thrift, pension, profit sharing, medical disability, accident, life insurance
plan, or a relocation plan or policy or any other plan, program, or policy
of the Company intended to benefit employees.
(f) NOTICE OF TERMINATION. A "Notice of Termination" of your
employment given by the Company shall mean a written notice given to you of
the termination of your employment which shall indicate the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(g) PERSON. The term "Person" shall mean and include any individual,
corporation, partnership, group, association, or other "person", as such term
is used in Section 14(d) of the Exchange Act, other than the Company or any
employee benefit plan(s) sponsored by the Company.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Chief Executive Officer of the Company with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
8. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall inure to the benefit of, and be binding upon,
any corporate or other successor or assignee of the Company which shall
acquire, directly or indirectly, by merger, consolidation or purchase, or
otherwise, all or substantially all of the business or assets of the Company.
The Company shall require any such successor, by an agreement in form and
substance satisfactory to you, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live,
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<PAGE>
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee, or
other designee or, if there is no such designee, to your estate.
9. INCREASED SEVERANCE PAYMENTS UPON APPLICATION OF EXCISE TAX.
(a) ADJUSTMENT OF PAYMENT. In the event any payments or benefits you
become entitled to pursuant to the Agreement or any other payments or
benefits received or to be received by you in connection with a change in
control of the Company or your termination of employment (whether pursuant to
the terms of any other agreement, plan, or arrangement, or other wise, with
the Company, any person whose actions result in a change in control or any
person affiliated with the Company or such person) (collectively the
"Severance Payments") will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay you an additional amount (the "Gross-Up
Payment") so that the net amount retained by you, after deduction of the
Excise Tax (but before deduction for any federal, state or local income tax)
on the Severance Payments and after deduction for the aggregate of any
federal, state, or local income tax and Excise Tax upon the Gross-Up Payment,
shall be equal to the Severance Payments. For purposes of determining whether
any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) the entire amount of the Severance Payments
shall be treated as "parachute payments" within the meaning of Section
280G(b) (2) of the Code and as subject to the Excise Tax, unless and to the
extent, in the written opinion of outside tax counsel selected by the
Company's independent accountants and reasonably acceptable to you, such
payments (in whole or in part) are not subject to the deferred payment or
benefit (constituting a part of the Severance Payments) shall be determined
by the Company's independent auditors in accordance with the principles of
Sections 280G(d) (3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, you shall be deemed to pay federal income
taxes at the highest marginal rate of the federal income taxation applicable
to individuals (without taking into account surtaxes or loss or reduction of
deductions) for the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of taxation in
the state and locality of your residence on the date of Termination. In the
event that the amount of Excise Tax you are required to pay is subsequently
determined to be less than the amount taken into account hereunder, you shall
repay to the Company promptly after the time that the amount of such
reduction in Excise Tax is finally determined the amount of the reduction,
together with the interest on the amount of such reduction at the rate of 6
percent per annum from the date of the Gross-Up Payment, plus, if in the
written opinion of outside tax counsel selected by the Company's independent
accountants and reasonably acceptable to you, such payment (or a portion
thereof) was not taxable income to you when reported or is deductible by you
for federal income tax purposes, the net federal income tax benefit you
actually realize as a result of making such payment pursuant to this
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sentence. In the event that the amount of Excise Tax you are required to pay
is subsequently determined to exceed the amount taken into account hereunder,
the Company shall make an additional Gross-Up Payment in the manner set forth
above in respect of such excess (plus any interest, additions to tax, or
penalties payable by you with respect to such excess) promptly after the time
that the amount can be reasonably determined.
(b) TIME OF PAYMENT: ESTIMATED PAYMENTS. The payments provided for in
subsection (a) above, shall be made not later than the fifth business day
following the Date of Termination; provided, however, that if the amount of
such payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate of 6 percent
per annum) as soon as the amount thereof can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to you, payable on the fifth day after demand by the Company
(together with interest at the rate of 6 percent per annum).
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is
agreed to in writing signed by you and the Chief Executive Officer or
President of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same, or at any prior or subsequent, time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement. The validity, interpretation, construction, and performance
of this Agreement shall be governed by laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
11. LEGAL FEES AND EXPENSES. The Company shall pay or reimburse any
reasonable legal fees and expenses you may incur in connection with any legal
action to enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and expenses on
a regular, periodic basis upon presentation by you of a statement or
statements prepared by your counsel in accordance with its usual practices.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
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13. PAYMENTS DURING CONTROVERSY. Notwithstanding the dependency of
any dispute or controversy, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary and installments of incentive
compensation) and continue you as a participant in all compensation, benefit,
and insurance plans in which you were participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7(c). Amounts paid under this Section are in
addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement. You
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter, which will then constitute our agreement on this subject.
Very truly yours,
NBT BANCORP INC.
By: /s/
_________________________
AGREED TO:
/s/
______________________________ idpc/rr
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EXHIBIT 10.45
Restricted Stock Agreement Between NBT Bancorp Inc. and (Director)
<PAGE>
RESTRICTED STOCK AGREEMENT
BETWEEN
NBT BANCORP INC. AND (Director)
AGREEMENT made as of January 1, 1997 by and between NBT Bancorp Inc.
("Company") and DIRECTOR ("Participant"):
WHEREAS, the Participant is a Director of the Company and, as such,
receives an annual retainer fee in addition to fees for meeting attendance.
The Company and Participant agree that the Participant is entitled to receive
the retainer fee in Company Stock subject to the conditions specified below.
THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
1. AWARD OF SHARES.
Under the terms of this Agreement, the Company has awarded the Participant a
Restricted stock award on January 1, 1997 ("Award Date"), covering 165 shares
of NBT Bancorp Inc. Common Stock, with a fair market value equal to $3,011.25
(annual director's retainer), subject to the terms, conditions and
restrictions set forth in this agreement.
2. AWARD RESTRICTIONS.
The shares covered by restricted stock award shall vest in accordance with
the schedule set forth below:
Full Years Elapsed from Award Date Percent Vested
1 33%
2 66%
3 100%
Upon the vesting of any part of the restricted stock award by virtue of the
lapse of the restriction period set forth above or under Section 4 of this
Agreement, the Company shall cause a stock certificate covering the requisite
number of shares in the name of the Participant or beneficiary(ies) to be
distributed within 30 days after vesting. Upon receipt of such stock
certificate(s), the Participant or beneficiary(ies) are free to hold or
dispose of such certificate at will.
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During the restriction period, the shares covered by the restricted stock
award not already vested are not transferable by the Participant by means of
sale, assignment, exchange, pledge, or otherwise. However, the restriction
period will lapse upon a change of ownership control within the meaning of
Internal Revenue Code Section 368(c) of Company or NBT Bancorp Inc. The lapse
ofthe restriction period will cause the restricted stock award to be fully
vested.
3. STOCK CERTIFICATES.
The stock certificate(s) evidencing the restricted stock award shall be
registered in the name of the Participant as of the Award Date. Physical
possession or custody of such stock certificate(s) shall be retained by the
Company until such time as the shares are vested (i.e. the restriction period
lapses). The Company reserves the right to place a legend on the stock
certificate(s) restricting the transferability of such certificate(s).
During the restriction period, except as otherwise provided in Section 2 of
this Agreement, the Participant shall be entitled to all rights of a
stockholder of the Company, including the right to vote the shares and
receive cash dividends. Stock dividends declared by the Company will be
characterized as restricted stock, and distributed with the principle
restricted stock.
4. TERM OF DIRECTORSHIP.
If the Participant terminates board membership with the Company due to death,
disability, retirement, or failure to be re-elected or re-appointed, the
restricted stock award, to the extent not already vested, shall vest in full
as of the date of such termination. Voluntary resignation or removal for
cause will result in forfeiture of the non-vested grants. The Participant may
designate a beneficiary(ies) to receive the stock certificate representing
that portion of the restricted stock award automatically vested upon death.
The participant has the right to change such beneficiary designation at will.
5. DUTY TO NOTIFY.
It is the Participant's duty to notify the Company in the event an Internal
Revenue Code Section 83(b) election is made in the year of the award.
6. WITHHOLDING TAXES.
The Company shall have the right to retain and withhold from any payment
under the restricted stock awarded the amount of taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
payment. At its discretion, the Company may require a Participant receiving
shares of Common Stock under a restricted stock award to reimburse the
Company for any such taxes required to be withheld by the Company and
withhold any distribution in whole or in part until the Company is so
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reimbursed. In lieu thereof, the Company shall have the right to withhold
from any other cash amounts due or to become due from the Company to the
Participant an amount equal to such taxes required to be withheld by the
Company to reimburse the Company for any such taxes or retain and withhold a
number of shares having a market value not less than the amount of such taxes
and cancel (in whole or in part) any such shares so withheld in order to
reimburse the Company for any such taxes.
7. IMPACT ON OTHER BENEFITS.
The value of the restricted stock award (either on the Award Date or at the
time the shares are vested) shall not be includable as compensation or
earnings for purposes of any other benefit plan offered by the Company.
8. ADMINISTRATION.
The Compensation Committee shall have full authority and discretion to decide
all matters relating to the administration and interpretation of this
Agreement. The Compensation Committee shall have full power and authority to
pass and decide upon cases in conformity with the objectives of this
Agreement under such rules as the Board of Directors of the Company may
establish.
Any decision made or action taken by the Company, the Board of Directors, or
the Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of this Agreement shall be at
their absolute discretion and will be conclusive and binding on all parties.
No member of the Board of Directors, Compensation Committee, or employee of
the Company shall be liable for any act or action hereunder, whether of
omission or commission, by the Participant or by any agent to whom duties in
connection with the administration of this Agreement have been delegated in
accordance with the provision of this Agreement.
9. COMPANY RELATION WITH PARTICIPANTS.
Nothing in this Agreement shall confer on the Participant any right to
continue as a director of the Company.
10. FORCE AND EFFECT.
The various provisions of this Agreement are severable in their entirety. Any
determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
11. GOVERNING LAWS.
Except to the extent pre-empted under federal law, the provisions of this
Agreement shall be construed, administered and enforced in accordance with
the domestic internal law of the State of New York.
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12. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties and shall not
be modified or amended except in writing and duly signed by the parties. No
waiver by either party of any default under this Agreement shall be deemed a
waiver of any later default.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
_____ day of ________, ________
NBT BANCORP INC.
By_______________________________
President
And
by_______________________________
Vice President
_______________________________
Signature of Participant
_______________________________
Name of Participant
(please print)
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I direct that all amounts payable at my death under the terms of a
certain NBT Bank, N.A. Agreement for Deferral of Receipt of Compensation be
paid as provided below. As used below "survive me" means "survive me by more
than 30 days." (Fill in the blank(s) of only one of the following)
1. To ______________________, if such person survives me, otherwise in equal
shares to my children who survive me; but if any child of mine does not
survive me and leaves a child or children, then such child's share equally
to his or her children, who survive me. At this time, my children are
____________________________________________________________.
2. To my children who survive me in equal shares but if any child of mine
does not survive me and leaves a child or children, then such child's
share equally to his or her children who survive me. At this time my
children are_________________________________________________________
_______________________________________.
3. To ______________________, trustee (or any successor trustee) of a trust
agreement of which I am the grantor dated ______________________________.
4. To:__________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_______________________
DATED this ________ day of ___________________________.
_______________________________
Signature of Participant
___________________________
Name of Participant
(please print)
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<PAGE>
EXHIBIT 10.50
Restricted Stock Agreement between NBT Bank, National Association
and (Director)
<PAGE>
RESTRICTED STOCK AGREEMENT
BETWEEN
NBT BANK, N.A. AND (DIRECTOR)
AGREEMENT made as of January 1, 1997 by and between NBT Bank, N.A.
("Company") and DIRECTOR ("Participant"):
WHEREAS, the Participant is a Director of the Company and, as such,
receives an annual retainer fee in addition to fees formeeting attendance.
The Company and Participant agree that the Participant is entitled to receive
the retainer fee in Company Stock subject to the conditions specified below.
THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
1. AWARD OF SHARES.
Under the terms of this Agreement, the Company has awarded the Participant a
Restricted stock award on January 1, 1997 ("Award Date"), covering 165 shares
of NBT Bancorp Inc. Common Stock, with a fair market value equal to $3,011.25
(annual director's retainer), subject to the terms, conditions and
restrictions set forth in this agreement.
2. AWARD RESTRICTIONS.
The shares covered by restricted stock award shall vest in accordance with
the schedule set forth below:
Full Years Elapsed from Award Date Percent Vested
1 33%
2 66%
3 100%
Upon the vesting of any part of the restricted stock award by virtue of the
lapse of the restriction period set forth above or under Section 4 of this
Agreement, the Company shall cause a stock certificate covering the requisite
number of shares in the name of the Participant or beneficiary(ies) to be
distributed within 30 days after vesting. Upon receipt of such stock
certificate(s), the Participant or beneficiary(ies) are free to hold or
dispose of such certificate at will.
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During the restriction period, the shares covered by the restricted stock
award not already vested are not transferable by the Participant by means of
sale, assignment, exchange, pledge, or otherwise. However, the restriction
period will lapse upon a change of ownership control within the meaning
of Internal Revenue Code Section 368(c) of Company or NBT Bancorp Inc. The
lapse of the restriction period will cause the restricted stock award to be
fully vested.
3. STOCK CERTIFICATES.
The stock certificate(s) evidencing the restricted stock award shall be
registered in the name of the Participant as of the Award Date. Physical
possession or custody of such stock certificate(s) shall be retained by the
Company until such time as the shares are vested (i.e. the restriction period
lapses). The Company reserves the right to place a legend on the stock
certificate(s) restricting the transferability of such certificate(s).
During the restriction period, except as otherwise provided in Section 2 of
this Agreement, the Participant shall be entitled to all rights of a
stockholder of the Company, including the right to vote the shares and
receive cash dividends. Stock dividends declared by the Company will be
characterized as restricted stock, and distributed with the principle
restricted stock.
4. TERM OF DIRECTORSHIP.
If the Participant terminates board membership with the Company due to death,
disability, retirement, or failure to be re-elected or re-appointed, the
restricted stock award, to the extent not already vested, shall vest in full
as of the date of such termination. Voluntary resignation or removal for
cause will result in forfeiture of the non-vested grants. The Participant may
designate a beneficiary(ies) to receive the stock certificate representing
that portion of the restricted stock award automatically vested upon death.
The participant has the right to change such beneficiary designation at will.
5. DUTY TO NOTIFY.
It is the Participant's duty to notify the Company in the event an Internal
Revenue Code Section 83(b) election is made in the year of the award.
6. WITHHOLDING TAXES.
The Company shall have the right to retain and withhold from any payment
under the restricted stock awarded the amount of taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
payment. At its discretion, the Company may require a Participant receiving
shares of Common Stock under a restricted stock award to reimburse the
Company for any such taxes required to be withheld by the Company and
withhold any distribution in whole or in part until the Company is so
2
<PAGE>
reimbursed. In lieu thereof, the Company shall have the right to withhold
from any other cash amounts due or to become due from the Company to the
Participant an amount equal to such taxes required to be withheld by the
Company to reimburse the Company for any such taxes or retain and withhold a
number of shares having a market value not less than the amount of such taxes
and cancel (in whole or in part) any such shares so withheld in order to
reimburse the Company for any such taxes.
7. IMPACT ON OTHER BENEFITS.
The value of the restricted stock award (either on the Award Date or at the
time the shares are vested) shall not be includable as compensation or
earnings for purposes of any other benefit plan offered by the Company.
8. ADMINISTRATION.
The Compensation Committee shall have full authority and discretion to decide
all matters relating to the administration and interpretation of this
Agreement. The Compensation Committee shall have full power and authority to
pass and decide upon cases in conformity with the objectives of this
Agreement under such rules as the Board of Directors of the Company may
establish.
Any decision made or action taken by the Company, the Board of Directors, or
the Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of this Agreement shall be at
their absolute discretion and will be conclusive and binding on all parties.
No member of the Board of Directors, Compensation Committee, or employee of
the Company shall be liable for any act or action hereunder, whether of
omission or commission, by the Participant or by any agent to whom duties in
connection with the administration of this Agreement have been delegated in
accordance with the provision of this Agreement.
9. COMPANY RELATION WITH PARTICIPANTS.
Nothing in this Agreement shall confer on the Participant any right to
continue as a director of the Company.
10. FORCE AND EFFECT.
The various provisions of this Agreement are severable in their entirety. Any
determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
11. GOVERNING LAWS.
Except to the extent pre-empted under federal law, the provisions of this
Agreement shall be construed, administered and enforced in accordance with
the domestic internal law of the State of New York.
3
<PAGE>
12. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties and shall not
be modified or amended except in writing and duly signed by the parties. No
waiver by either party of any default under this Agreement shall be deemed a
waiver of any later default.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
_____ day of ________, ________
NBT BANK, N.A.
By_______________________________
President
And
by_______________________________
Vice President
_______________________________
Signature of Participant
______________________________
Name of Participant
(please print)
4
<PAGE>
INTERNAL REVENUE CODE SECTION 83(b) ELECTION
Taxpayer's Name:
Address:
_________________________________________________________________
_________________________________________________________________
Taxpayer's Social Security Number _____-___-_______
Description of property transferred: _________ Shares of restricted common
stock of NBT Bancorp Inc.
Date(s) of property transfer ______________________________________________
Calendar year for which the election is being made: _______________________
Nature of the restriction to which the property is subject: THE COMMON STOCK
WILL BECOME FULLY VESTED AFTER THREE YEARS, WITH ONE-THIRD OF THE SHARES
VESTING AT THE END OF YEARS ONE, TWO AND THREE. TERMINATION OF EMPLOYMENT
WITH NBT BANK, N.A. PRIOR TO THE COMPLETION OF THE THREE-YEAR TERM WILL
RESULT IN FORFEITURE OF THE RESTRICTED STOCK.
Amount paid for the property: NONE
Fair market value of the property at the time of transfer as determined
without regard to any lapse restrictions $___________ per share of NBT
Bancorp Inc. stock
I hereby certify that a copy of this election has been furnished to NBT Bank,
N.A. and NBT Bancorp Inc.
______________________________
Signature of Taxpayer
______________________________
Date
5
<PAGE>
BENEFICIARY DESIGNATION
I direct that all amounts payable at my death under the terms of a
certain NBT Bank, N.A. Agreement for Deferral of Receipt of Compensation be
paid as provided below. As used below "survive me" means "survive me by more
than 30 days." (Fill in the blank(s) of only one of the following)
1. To ______________________, if such person survives me, otherwise in equal
shares to my children who survive me; but if any child of mine does not
survive me and leaves a child or children, then such child's share equally
to his or her children, who survive me. At this time, my children are
____________________________________________________________.
2. To my children who survive me in equal shares but if any child of mine
does not survive me and leaves a child or children, then such child's
share equally to his or her children who survive me. At this time my
children are__________________________________________________________
_______________________________________.
3. To ______________________, trustee (or any successor trustee) of a trust
agreement of which I am the grantor dated ______________________________.
4. To:____________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________
DATED this ________ day of ___________________________.
_______________________________
Signature of Participant
___________________________
Name of Participant
(please print)
6
<PAGE>
EXHIBIT 10.55
Restricted Stock Agreement Between NBT Bank, National Association
and Daryl R. Forsythe
<PAGE>
RESTRICTED STOCK AGREEMENT
BETWEEN
NBT BANK, N.A. AND DARYL R. FORSYTHE
AGREEMENT made as of January 1, 1997 by and between NBT Bank, N.A.
("Company") and DARYL R. FORSYTHE ("Participant"):
WHEREAS, the Company maintains the 1996 Executive Incentive Compensation
Plan (EICP), and the NBT Bank, N.A. Agreement for Deferral of Receipt of
Compensation ("Deferral Agreement") under which the Participant is entitled
to receive Company stock subject to the conditions specified in the Deferral
Agreement;
THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
1. AWARD OF SHARES.
Under the terms of the Deferral Agreement, the Company has awarded the
Participant a restricted stock award on ____________, 19___ ("Award Date"),
covering ________ shares of NBT Bancorp Inc. Common Stock, with a fair market
value on such date equal to 25% of the deferred amount under the Deferral
Agreement, subject to the terms, conditions and restrictions set forth in
this Agreement.
2. AWARD RESTRICTIONS.
The shares covered by restricted stock award shall vest in accordance with
the schedule set forth below:
Full Years Elapsed from Award Date Percent Vested
3 33%
4 66%
5 100%
Upon the vesting of any part of the restricted stock award by virtue of the
lapse of the restriction period set forth above or under Section 4 of this
Agreement, the Company shall cause a stock certificate covering the requisite
number of shares in the name of the Participant or beneficiary(ies) to be
distributed within 30 days after vesting. Upon receipt of such stock
certificate(s), the Participant or beneficiary(ies) are free to hold or
dispose of such certificate at will.
During the restriction period, the shares covered by the restricted stock
award not already vested are not transferable by the Participant by means of
sale, assignment, exchange, pledge, or otherwise. However, the restriction
period will lapse upon a change of ownership control within the meaning of
Internal Revenue Code Section 368(c) of Company or NBT Bancorp Inc. The
1
<PAGE>
lapse of the restriction period will cause the restricted stock award to be
fully vested. To the extent that such vesting, combined with any other
payment, will cause taxation under Internal Revenue Code Section 280G
(a parachute payment), the total amount of payment will be reduced to avoid
such tax.
3. STOCK CERTIFICATES.
The stock certificate(s) evidencing the restricted stock award shall be
registered in the name of the Participant as of the Award Date. Physical
possession or custody of such stock certificate(s) shall be retained by the
Company until such time as the shares are vested (i.e. the restriction period
lapses). The Company reserves the right to place a legend on the stock
certificate(s) restricting the transferability of such certificate(s).
During the restriction period, except as otherwise provided in Section 2 of
this Agreement, the Participant shall be entitled to all rights of a
stockholder of the Company, including the right to vote the shares and
receive cash dividends. Pursuant to the Deferral Agreement, at the election
of the Participant, cash dividends are payable to the Participant at
declaration or may be deferred. Stock dividends declared by the Company will
be characterized as restricted stock, and distributed with the principle
restricted stock.
4. EMPLOYMENT.
If the Participant terminates employment with the Company due to death or
total permanent disability during the restriction period, the restricted
stock award, to the extent not already vested, shall vest in full as of the
date of such termination. Disability eligibility will be determined at the
discretion of the Board of Directors. Termination of the Participant's
employment with the Company for any other reason shall result in forfeiture
of the restricted stock award on the date of termination to the extent not
already vested. The Participant may designate a beneficiary(ies) to receive
the stock certificate representing that portion of the restricted stock award
automatically vested upon death. The Participant has the right to change
such beneficiary designation at will.
5. DUTY TO NOTIFY.
It is the Participant's duty to notify the Company in the event an Internal
Revenue Code Section 83(b) election is made in the year of the award.
6. WITHHOLDING TAXES.
The Company shall have the right to retain and withhold from any payment
under the restricted stock awarded the amount of taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
payment. At its discretion, the Company may require a Participant receiving
shares of Common Stock under a restricted stock award to reimburse the
Company for any such taxes required to be withheld by the Company and
withhold any distribution in whole or in part until the Company is so
reimbursed. In lieu thereof, the Company shall have the right to withhold
from any other cash amounts due or to become due from the Company to the
Participant an amount equal to such taxes required to be withheld by the
Company to reimburse the Company for any such taxes or retain and withhold a
number of shares having a market value not less than the amount of such taxes
2
<PAGE>
and cancel (in whole or in part) any such shares so withheld in order to
reimburse the Company for any such taxes.
7. IMPACT ON OTHER BENEFITS.
The value of the restricted stock award (either on the Award Date or at the
time the shares are vested) shall not be includable as compensation or
earnings for purposes of any other benefit plan offered by the Company.
8. ADMINISTRATION.
The Compensation Committee shall have full authority and discretion (subject
only to the express provisions of the Deferral Agreement), to decide all
matters relating to the administration and interpretation of the Deferral
Agreement and this Agreement. The Compensation Committee shall have full
power and authority to pass and decide upon cases in conformity with the
objectives of this Agreement under such rules as the Board of Directors of
the Company may establish.
Any decision made or action taken by the Company, the Board of Directors, or
the Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of this Agreement shall be at
their absolute discretion and will be conclusive and binding on all parties.
No member of the Board of Directors, Compensation Committee, or employee of
the Company shall be liable for any act or action hereunder, whether of
omission or commission, by the Participant or by any agent to whom duties in
connection with the administration of this Agreement have been delegated in
accordance with the provision of this Agreement.
9. EMPLOYER RELATION WITH PARTICIPANTS.
Nothing in the Deferral Agreement or this Agreement shall confer on the
Participant any right to continue in the employ of the Company or in any way
affect the Company's right to terminate the Participant's employment without
prior notice at any time for any or no reason.
10. AMENDMENT.
This Agreement shall be subject to the terms of the Deferral Agreement as
amended except that the restricted stock award that is the subject to this
agreement may not in any way be restricted or limited by any Deferral
Agreement amendment or termination approved after the date of the award
without the Participant's written consent.
11. FORCE AND EFFECT.
The various provisions of this Agreement are severable in their entirety. Any
determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
3
<PAGE>
12. GOVERNING LAWS.
Except to the extent pre-empted under federal law, the provisions of this
Agreement shall be construed, administered and enforced in accordance with
the domestic internal law of the State of New York.
13. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties and shall not
be modified or amended except in writing and duly signed by the parties. No
waiver by either party of any default under this Agreement shall be deemed a
waiver of any later default.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
28th day of January, 1997.
NBT BANK, N.A.
By /s/ Joe C. Minor
_______________________________
S. Vice President, CFO
And
by_______________________________
Vice President
/s/ Daryl R. Forsythe
-------------------------------
Signature of Participant
DARYL R. FORSYTHE
-------------------------------
Name of Participant
(please print)
4
<PAGE>
INTERNAL REVENUE CODE SECTION 83(B) ELECTION
Taxpayer's Name: Daryl R. Forsythe
Address:
_________________________________________________________________
_________________________________________________________________
Taxpayer's Social Security Number _____-___-_______
Description of property transferred: _________ Shares of restricted common
stock of NBT Bancorp Inc.
Date(s) of property transfer ________________________________________________
Calendar year for which the election is being made: _________________________
NATURE OF THE RESTRICTION TO WHICH THE PROPERTY IS SUBJECT: THE COMMON STOCK
WILL BECOME FULLY VESTED AFTER FIVE YEARS, WITH ONE-THIRD OF THE SHARES
VESTING AT THE END OF YEARS THREE, FOUR AND FIVE. TERMINATION OF EMPLOYMENT
WITH NBT BANK, N.A. PRIOR TO THE COMPLETION OF THE FIVE-YEAR TERM WILL RESULT
IN FORFEITURE OF THE RESTRICTED STOCK.
Amount paid for the property: NONE
Fair market value of the property at the time of transfer as determined
without regard to any lapse restrictions $___________ per share of NBT
Bancorp Inc. stock
I hereby certify that a copy of this election has been furnished to NBT Bank,
N.A. and NBT Bancorp Inc.
______________________________
Signature of Taxpayer
______________________________
Date
5
<PAGE>
BENEFICIARY DESIGNATION
I direct that all amounts payable at my death under the terms of a
certain NBT Bank, N.A. Agreement for Deferral of Receipt of Compensation be
paid as provided below. As used below "survive me" means "survive me by more
than 30 days." (Fill in the blank(s) of only one of the following)
1. To ______________________, if such person survives me, otherwise in equal
shares to my children who survive me; but if any child of mine does not
survive me and leaves a child or children, then such child's share equally
to his or her children, who survive me. At this time, my children are
____________________________________________________________.
2. To my children who survive me in equal shares but if any child of mine
does not survive me and leaves a child or children, then such child's
share equally to his or her children who survive me. At this time my
children are__________________________________________________________
_______________________________________.
3. To ______________________, trustee (or any successor trustee) of a trust
agreement of which I am the grantor dated ______________________________.
4. To:__________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
________________________
DATED this ________ day of ___________________________.
_______________________________
Signature of Participant
___________________________
Name of Participant
(please print)
<PAGE>
EXHIBIT 21
List of Subsidiaries of the Registrant
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
NBT BANCORP INC. has one subsidiary, which is wholly owned:
NBT Bank, National Association
52 South Broad Street
Norwich, New York 13815
Telephone: (607) 337-6000
E.I.N. 15-0395735
<PAGE>
EXHIBIT 23
Consent of KPMG Peat Marwick LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
NBT Bancorp Inc.:
We consent to incorporation by reference in the registration statements
on Form S-3 (File No. 33-12247) and Form S-8 (File Nos. 33-18976,
33-77410 and 333-02925) of NBT Bancorp Inc. of our report dated January
17, 1997, relating to the consolidated balance sheets of NBT Bancorp
Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996,
which report has been included herein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Syracuse, New York
March 6, 1997
<PAGE>
EXHIBIT 27
Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NBT
BANCORP INC'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 33,678
<INT-BEARING-DEPOSITS> 2,112
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 369,202
<INVESTMENTS-CARRYING> 42,239
<INVESTMENTS-MARKET> 42,238
<LOANS> 654,593
<ALLOWANCE> 10,473
<TOTAL-ASSETS> 1,138,986
<DEPOSITS> 916,319
<SHORT-TERM> 88,244
<LIABILITIES-OTHER> 7,964
<LONG-TERM> 20,195
0
0
<COMMON> 8,838
<OTHER-SE> 97,426
<TOTAL-LIABILITIES-AND-EQUITY> 1,138,986
<INTEREST-LOAN> 57,660
<INTEREST-INVEST> 26,636
<INTEREST-OTHER> 91
<INTEREST-TOTAL> 84,387
<INTEREST-DEPOSIT> 31,942
<INTEREST-EXPENSE> 36,365
<INTEREST-INCOME-NET> 48,022
<LOAN-LOSSES> 3,175
<SECURITIES-GAINS> 1,179
<EXPENSE-OTHER> 34,422
<INCOME-PRETAX> 19,287
<INCOME-PRE-EXTRAORDINARY> 12,179
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,179
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 4.69
<LOANS-NON> 3,320
<LOANS-PAST> 1,051
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 30,748
<ALLOWANCE-OPEN> 9,120
<CHARGE-OFFS> 2,778
<RECOVERIES> 956
<ALLOWANCE-CLOSE> 10,473
<ALLOWANCE-DOMESTIC> 7,036
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,437
</TABLE>
